Thursday’s Master Investor Market Report

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Thursday’s Master Investor Market Report

– The FTSE 100 fell by 91.22 points to 6,859.24 points
– The FTSE 250 tumbled 173.04 points to 18,090.42
– The FTSE All Share decreased by 44.02 points to 3,742.82 points
– The FTSE AIM All Share finished the day down by 0.11 points at 778.02 points.

Quelle surprise! The Bank of England’s Monetary Policy Committee has held interest rates at 0.5% for another month. Does anybody remember the days when interest rates weren’t at rock bottom? The scale of the bond purchase stimulus scheme also remains unchanged. Neither decision came as a surprise despite inflation falling into negative figures last month. Howard Archer, Chief UK Economist at IHS Global Insight, provided the following assessment:

“Current robust consumer activity and signs that housing market activity is picking up suggest that an interest rate hike early on in 2016 is becoming increasingly likely, although the softer set of purchasing managers surveys for May fuel uncertainty over the economy’s current underlying strength. Much will clearly depend on how economic growth, earnings and productivity develop over the coming months, as well as just how quickly inflation moves up later on this year”.

The number of homes coming up for sale in the UK is at its lowest level for years, according to Halifax. The building society said that prices rose by 8.6% across the country during the year to May, but fell by 0.1% from April. Analysts believe that unless the bottleneck in supply is cleared out, prices will continue to rise through the rest of 2015.

George Osborne has said that the Government will sell off its remaining 30% stake in Royal Mail (RMG) to raise £1.5 billion. The Department of Business, Innovation and Skills has appointed Rothschild to advise on the disposal. Shares in Royal Mail were initially floated at 330p in October 2013 and closed today at 500p, down by 26p since opening.

Palladium and platinum producer Johnson Matthey (JMAT) beat forecasts as it earned pre-tax profits of £495 million over the year ended 31st March, a 21.9% improvement driven by the disposal of its gold and silver arms. Even on an underlying basis, profitability exceeded analyst expectations of 2.5%, as a variety of factors including a low effective tax rate and new vehicle emissions regulations coming into effect supported the firm’s progress. Revenues dropped by 10%, but a substantial decline had been predicted due to the reworking of Anglo Platinum contracts. The shares fell by 185p to 3,331p.

Pre-tax profits at Pets at Home (PETS) raced ahead by 286% to £87 million in the year ended 26th March as revenues grew and there was no repeat of last year’s exceptional cost booking. Gross margins also rose by 40 basis points as demand for advanced nutrition and own brand products increased. The expanded services division, which includes veterinary practices, saw its margins rise by 630 bps to 32.6%. The shares closed at 275p, down by 5p.

Pharmaceutical outfit Shire (SHP) saw its shares fall by 50p to 5,465p after it lost a patent appeal appeal in the US. The court ruled that Avactis had not infringed upon Shire’s intellectual property rights. Analysts from Bernstein believe that the firm will return capital in the near future and that this decision generates substantial risk, but wrote that “some risk was factored in already (we modeled 50% risk) and the product is expected to be lost regardless in 2020. Thus, the discounted cash flow value of three years of earnings being removed is rather modest – around $1.3bn”.

Retail chain operator Kingfisher (KGF) was upgraded from “underperform” to “neutral” by Bank of America Merrill Lynch, who also upped its target price from 330p to 390p. The bank said that its prior rating had been based on weak growth and poor performance in Europe, but that the new B&Q management team was inspiring greater confidence. The analysts wrote that “B&Q like-for-like growth remains muted but is run rating ahead of our forecasts and is likely to be in positive territory again in 2016”. Kingfisher shares climbed 9.8p to 377.9p.

Digital entertainment group Amino Technologies (AMO) saw its shares rise by 4.5p to 142.5p following a strong half year ended 31st May where it returned to revenue growth. The company informed investors that it expects growth to continue into its full year performance. Broker N+1 Singer reiterated its “Buy” rating and said “we do not expect to change our full year revenue or profit before tax forecasts at this stage of the year, but a strong first half leaves the group well placed to achieve our full year forecasts”.

Hewlett Packard has joined RapidCloud International’s (RCI) strategic partnership with CS Loxinfo. Under the terms of the deal, RapidCloud’s software will be provided over HP’s Helion platform in exchange for a portion of revenues. Shares in the company fell during the course of the day, but closed flat at 40p.

Feedback (FDBK), a medical imaging software provider, has said that it does not know of any material reason for its dramatically increased share price. The company placed new shares yesterday with director participation. Feedback stock advanced 13.33% to 2.55p.

Aggreko (AGK) has dropped out of the FTSE 100 and been replaced by Inmarsat (ISAT) as part of a quarterly review of the index.

Friday’s news today

Tomorrow, we are expecting full-year results from Halfords (HFD) and KCOM Group (KCOM).

On the macroeconomic front, there will be US employment data and information on German factory orders.

Quote of the day

“As with any challenge, the sooner you get on with it, the better.”
― George Osborne

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