Leading shares have moved sharply higher on hopes that a solution to Greece’s financial troubles can be found, while mining groups have been boosted by an Australian interest rate cut.
BHP Billiton is 75.5p better at 1559.5p after the Reserve Bank of Australia reduced its cash rate by 25 basis points to a record low of 2.25%, to help lift its economy and keep a lid on the Australian dollar. A weaker currency benefits BHP in terms of its cost base in the country, and is also helpful to Rio Tinto, up 101p at £30.62.
Other miners are also stronger as copper and other metals moved higher despite continuing concerns about global demand, with Antofagasta up 33p at 705p and Anglo American 52.5p better at 1176.5p.
So the FTSE 100 has jumped 92.90 points to 6875.45, helped by proposals from the new Greek government to resolve its debt problems, showing a less confrontational stance than had been feared. Mike van Dulken, head of research at Accendo Markets, said:
The positive open comes from more accommodate central bank moves with the Royal Bank of Australia unexpectedly cutting rates to a record low while oil posted further rises and optimism rose regarding a Greek solution to its debt woes.
A jump in the crude price - Brent is up 3% at $56.43 a barrel - has lifted Tullow Oil by 15p to 414p and Royal Dutch Shell A shares by 73.5p to 2142.5p.
BP has added 12.5p to 450.2p following better than expected fourth quarter profits, including an unexpected gain from its stake in Russia’s Rosneft. BG is up 10p at 944.2p despite taking a $6bn impairment charge related to the recent slump in the oil price.
But Aberdeen Asset Management has missed out, falling 8.6p to 431.5p after it reported a slight fall in funds under management in the three months to December, as investors pulled money out of emerging market funds. In a hold note Numis said:
Assets under managment at £323.3bn were fractionally lower than our forecast £325bn, due to slightly weaker than expected net flows in most parts of the business (excluding Scottish Widows, where flows were marginally better). In particular the company highlighted that it had a difficult December, especially within EM equities and debt, contrasting with what it saw as an “encouraging” October/November. Management say that January flows have returned to more “normal” levels.
Overall, despite this being an at the margin a little disappointing statement, we do not expect it to have any material impact on our current forecasts or view of the company, reflecting the materiality of the difference and management comments attributing it mainly to a difficult December.
Capita is down 15p at £11 as the outsourcing group paid €210m for avocis, a customer contract management company operating in Germany, Austria and Switzerland.
Associated British Foods has fallen 21p to £30.93 after it wrote down its investment in bioethanol plant operator Vivergo Fuels by £98m due to falling prices.
Among the mid-caps Afren has added 4.49p to to 14.49p in the wake of the recent news it had delayed $65m of debt payments, as investors await news of a possible bid from Nigeria’s Seplat. But analyst James Hosie at Barclays said:
Delaying $65m of imminent debt and interest payments until the end of February gives Afren time to continue its discussions with Seplat over a possible merger, its largest bondholders on immediate funding needs and potential investors interested in recapitalising the business.
At this point, we believe a positive outcome for equity holders rests on Seplat (or an alternative acquirer) being willing to assume the debt at face value and place some value on the equity to take control of the business as a going concern.
However, using the Brent forward curve, our core net asset value is negative and we forecast 2015-20 cash flows can do no more than service the existing debt as it falls due. We therefore reiterate our underweight rating, moving our price target to not available from 28p, on the basis that we see limited value in the equity.
