London's blue chip stocks were largely flat by Wednesday afternoon, with earlier gains erased despite strong gains for Prudential and the index's cabal of mining heavyweights.
The Pru was the standout gainer as it announced plans to split its UK and Europe business and posted a rise in annual profit driven by surging sales at its Asian business, also announcing the sale of £12bn of annuities to Rothesay Life. The UK business, M&G Prudential, and the international business, keeping the Prudential name, will both be listed in London.
Analysts had expected the group to be split and some expect further decoupling in the future. RBC Capital Markets predicts the Asian business will be split from the US business when US life valuations recover, and the asset manager M&G will be split from the UK insurance business. In a sum of the parts valuation, RBC said M&G Prudential is worth around £9.8bn, taking account of the fact that M&G manages Prudential's insurance assets, which are not growing.
“M&G Prudential will be highly cash generative and low growth while the International business will be high growth.”
London's heavyweight mining sector rallied, led by Antofagasta, Anglo American, BHP Billiton and Glencore after better-than-expected industrial production out of China lifted metals prices, with upgrades at Goldman Sachs helping too.
Goldman's view of the sector was improved as it reflected on miners' repaired balance sheets and the robust outlook for commodity prices, given strong economic growth in the rest of the world. As a result of the above factors, analysts estimated that, at the prevailing spot prices for commodities, most miners would move into a net cash position over the next two years.
GKN was higher amid reports that US-based auto parts giant Dana Inc could list shares in London as a condition of its $6.1bn acquisition of the UK engineer's power train business.
Dollar-dependent stocks such as CRH and British American Tobacco were lifted as the greenback rallied slightly.
Morrisons led the fallers despite a pretty strong set of results that included a special dividend and confident comments about further growth to come.
Old Mutual was down a day after two US insurers, the Travelers Companies and St. Paul Fire & Marine lodged a claim in a US District Court that appeared to relate to legacy items from Old Mutual's US life operations. Commenting on the company on Wednesday, Deutsche Bank said Old Mutual was unlikely to pay a special dividend from the managed separation of the group “until all contingencies are addressed”, with the new US court matter being added to ongoing investigations in the UK.
FTSE 100 (UKX) 7,139.93 0.02%
FTSE 100 – Risers
Prudential (PRU) 1,944.50p 6.52%
Antofagasta (ANTO) 940.00p 2.78%
Anglo American (AAL) 1,775.20p 2.52%
Glencore (GLEN) 382.95p 1.66%
CRH (CRH) 2,468.00p 1.31%
British American Tobacco (BATS) 4,217.00p 1.22%
GKN (GKN) 435.10p 1.19%
Legal & General Group (LGEN) 259.70p 1.17%
Paddy Power Betfair (PPB) 7,760.00p 1.04%
London Stock Exchange Group (LSE) 3,944.00p 1.00%
FTSE 100 – Fallers
Morrison (Wm) Supermarkets (MRW) 215.20p -4.90%
Old Mutual (OML) 249.10p -2.58%
Kingfisher (KGF) 345.60p -2.40%
Standard Chartered (STAN) 763.50p -1.74%
Mediclinic International (MDC) 598.80p -1.71%
Sainsbury (J) (SBRY) 238.20p -1.41%
Croda International (CRDA) 4,522.00p -1.27%
Just Eat (JE.) 765.20p -1.26%
BP (BP.) 468.20p -1.22%
Fresnillo (FRES) 1,213.00p -1.18%