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Aviva shines as China buoys deflated markets
by Chris Marshall on Aug 08, 2013 at 10:07
Signs of improvement in the Chinese economy helped re-instil some vigour into stock markets, with Aviva leading small FTSE 100 gains that could end a four-day losing streak.
Having declined again yesterday amid fears about the end of US asset buying and slight disappointment over Mark Carney’s stimulus plans – forward guidance ‘lite’ as some analysts described the Bank of England governor’s plans to keep rates low for three years – Britain’s benchmark index rose 0.2% to 6,526 this morning.
The pound, which yesterday unexpectedly rose despite Carney’s linking of unemployment to interest rates, remained stubbornly higher, up 0.1% to $1.5505.
Today’s small gains across European equity markets came after investors were finally dealt some better news on the stumbling Chinese economy. Export and import growth jumped to 5.1% and 10.9% year on year in July from -3.1% and -0.7% in June, official statistics showed.
‘July trade data are supportive of a better economic outlook for China and will surely help boost market confidence,’ commented Ting Lu, an economist at Bank of America Merrill Lynch.
Elsewhere in Asia, central banks in Korea and Japan both voted to keep policy on hold.
London-listed resources companies, always in thrall to Chinese demand, ripped higher. Antofagasta (ANTO.L) rose 3.6% to 875p, Glencore Xstrata (GLEN.L) was up 3.1% to 279p and Anglo American (AAL.L) gained 2.7% to trade at £14.33.
Of several major financial companies reporting results, Aviva (AV.L) was the star performer, returning to investor favour after previously slashing its dividend and embarking on a cost-cutting drive. The insurer’s shares rose 6.5% to 395p after reporting a 5% rise in operating profits in the first half of the year.
‘Although it is early days, we are encouraged by new management’s track record so far,’ commented Fahad Changazi, an analyst at Nomura. ‘We believe a focus on cash, coupled with operational improvements in the businesses, and a continued focus on the relatively higher expense base vs peers, should lead to re-rating of the stock.’
Steady on, said other City scribblers. ‘Whilst unlikely to knock the company over, we believe that the market is taking too much for granted, too soon, as regards the turning around of this behemoth,’ was the view from Shore Capital’s financials expert Eamonn Flanagan.
At the other end of the index Schroders (SDRt.L) fell 5%, despite strong half-year results. The fund manager upped its dividend by 23%, revealing profit before tax up 25% to £221.7 million and assets under management up 21% to £235.7 billion.
However more recent outflows and profit taking after a recent strong share price performance were probably behind today’s share price decline to £23.72
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- Aviva PLC (AV.L)
- Schroders PLC (SDRt.L)
- Anglo American PLC (AAL.L)
- Antofagasta PLC (ANTO.L)
- Glencore Xstrata PLC (GLEN.L)
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