Thuesday’s Master Investor Market Report featuring RBS, Shire, Kenmare Resources and Optare

• The Eurozone exited deflation in April after four months of negative price movement, with Eurostat saying that despite continuing cuts in energy costs, inflation rose to 0% for the month. March unemployment data for the Euro area were also published and showed that seasonally adjusted jobless rates were steady at 11.3%. Jonathan Loynes, Chief European Economist at Capital Economics, said that “it is of some relief that the bout of technical deflation has been shorter-lived than we had feared. But it could return if oil and commodity prices fall again and even continued low inflation will hinder the indebted countries’ fiscal consolidation efforts”.
• New claims for unemployment benefits in the United States fell to the lowest rate since early 2000 with 262,000 claims filed, a drop of 34,000 since last week. This offers some reassurance that a recovery is continuing despite yesterday’s disappointing GDP figures. Economists had forecast claims in the region of 288,000. The Bureau of Labor Statistics also said that employment costs in the US rose by 0.7% in the first quarter of 2015.
• The FTSE 100 rose by 20.61 points to 6,966.89 points; the FTSE 250 declined by 6.46 points to 17,474.73; the FTSE All Share grew by 8.88 points to 3,762.76 points; and the FTSE AIM All Share finished the day up by 1.83 points at 754.23 points.

Royal Bank of Scotland (RBS) recorded losses of £456 million in the 3 months ended 31st March, more than double what analysts had feared as the bank set aside £856 million to cover fines and litigation, and spent £453 million on restructuring costs. In the same period of 2014, the firm made a profit of £1.28 billion. The company made strong progress in reducing its operating costs and was praised for this by analysts at Bernstein who also wrote that “going forwards, we expect a further pick up in writebacks as NPLs drop off and residential prices resume their move up. We also expect writebacks will continue to be lumpy, adding up to a total of£1.4bn of net write-backs in the next few years with the continued Irish recovery momentum”. The shares dropped by 9.9p to 339.6p.

Pharmaceuticals manufacturer Shire (SHP) beat analyst expectations for the first quarter as it increased revenues by 11% to $1.48 billion due to increased sales of its gastrointestinal disease and ADHD treatments. Profits also increased, largely due to a drop in development costs. Management are focused on expanding the business via acquisition in the wake of the failed takeover attempt by AbbVie last year. Jeff Poulton was assigned the permanent CFO position, having been interim CFO since December. Shire shares advanced 55p to 5,345p.

Minerals and exploration firm Kenmare Resources (KMR) has received a proposal from Iluka Resources for an all share merger in which shareholders will receive 0.016 Iluka shares for each Kenmare share. The deal would be subject to a number of pre-conditions including approval from the Government of Mozambique and shareholders. The firm also announced a drastic 57% decline in ore extraction for the first quarter and the market for pigments remained week during the period, but management expect demand to improve during 2015. The shares rose by 0.75p to 3.85p.

Bus and coach manufacturer Optare (OPE) has announced that it plans to cancel its AIM listing, having concluded a review of the business and determined that it is not in the best interests of the company or its shareholders to maintain the listing. The company has been increasingly reliant on Ashok Leyland, who holds a 75.1%, stake, over the previous years and the board does not believe that it is benefiting from the commonly cited advantages of public trading in terms of capital raising and liquidity. The shares lost 62.5% of their value and closed at 0.06p.

Tomorrow’s news today

Lloyds Banking Group (LLOY), Rentokil Initial (RTO) and COLT Group (COLT) will be among the firms publishing updates and results tomorrow morning.

There will also be figures published on UK money supply and lending.

Quote of the day

“Price is what you pay. Value is what you get.”
― Warren Buffett