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Virgin Money lends glitter to faltering FTSE
FTSE 100 loses ground after positive start as economic realities weigh but Virgin Money bucks the banking trend with good annual results.
The FTSE 100 lost ground after a positive start prompted by overnight stock markets gains in the US and Asia.
After opening higher at 6,192 in response to encouraging economic data from the US and Australia, the UK’s main stock market index shed 22 points or 0.4% to 6,131.
Ratings agency Moody’s dampened the mood by downgrading its outlook on Chinese government debt to ‘negative’ from ‘stable’. It pointed to uncertainty over the country’s ability to implement economic reforms and its rising debt and falling reserves.
Schroders darkened the mood further by trimming its forecast for world growth this year to 2.4% from 2.6%.
Chief economist Keith Wade said the fund manager’s move followed small downgrades to both advanced and emerging market economies and also the Bank of Japan’s decision in January to introduce negative interest rates. This had crystallised fears that central banks were ‘firing blanks’, he said.
‘So growth continues, but our forecasts have drifted toward a world of weaker growth, lower inflation and easier monetary policy. Nonetheless, the longer run outlook remains difficult; underlying growth is weak making the world economy more vulnerable to shocks at a time when monetary policy has become impotent,’ said Wade.
Challenger bank Virgin Money Holdings (VM) sprang the biggest surprise with a 53% surge in underlying annual, pre-tax profits. After a series of downbeat results from the big high street banks the news was a tonic to investors and shares in the mid-cap FTSE 250 lender, founded by Sir Richard Branson (pictured), spiked nearly 6% to 360.5p.
Intertek (ITRK) was the biggest blue chip faller, down 4.3% to £28.75, after Goldman Sachs analysts cut their price target following the systems testing provider’s annual results. These showed a 15% increase in operating cash flow to £466 million and a 3.5% lift in revenue to £2.16 billion and a 6.5% rise in total dividends to 52.3p per share.
ITV (ITV) also fell 4.3% to 239p despite rewarding shareholders with a 10p special dividend on top of a final payment of 4.1p per share. Full-year profits jumped 18% to £865 million but analysts focused on the broadcaster’s forecast that first quarter advertising revenue would be flat and an admission that it had lost 4% audience share last year.
Investec analyst Steve Liechti commented: ‘We remain at “hold” – persistent takeover speculation in the media and retransmission fees imply some support,’ he said.
Rolls-Royce (RR) dropped 7.5p or 1.1% to 675.5p after the jet engine maker accepted a representative from activist investor ValueAct on to its board. Chairman Ian Davis said the appointment of Bradley Singer would not change the group’s strategy but would bring in an executive experienced in public companies going through change.
Investors are hoping the arrival of the 10% shareholder in the board room will help new chief executive Warren East turn round the company after a string of profits warnings.
The smaller company end of the market was enlivened by good full-year results from shipping broker James Fisher (FSJ), up 12% to £10.59.
Electrical retailer Darty (DRTY) jumped 9.5% to 126p after a cash bid from South African furniture group Steinhoff threatened to scupper its planned merger with French bookstore Fnac.
On Wall Street the US stock market is expected to open lower as investors digest the results of ‘Super Tuesday’ which has made it likely that Donald Trump will lead the Republicans against Hilary Clinton for the Democrats.
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by David Kempton on May 24, 2016 at 17:15