FTSE weak as US rate worries return, Centrica maintains dividend, Barclays ups payout guidance and Anglo American boosted by commodities rebound

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“The FTSE 100 was down more than 1% early on as investors digested the latest minutes from the US Federal Reserve” says AJ Bell Investment Director Russ Mould.

Centrica

“Investors were expecting a very poor 2017 performance from Centrica and that is what they got with profit down 17% to £1.25bn.

“Relief the situation had not deteriorated any further helped the shares rise in response to the results. Notably, the company has also maintained its dividend at 12p.

“Traditionally utilities have been perceived as relatively safe investments with earnings which, because they were heavily regulated, were also highly predictable. And for this reason, they were also seen as good sources of income.

“Based on guidance the dividend will stay at 12p for 2018, the shares offer a yield of 8.9%. This implies lingering market scepticism over the fate of the payout.

“No wonder. The group plans to forgo major acquisitions and cut costs, but it faces the possible implementation of price caps in the UK and still needs to address customer losses in both its consumer and corporate businesses.”

Barclays

“The third major bank to announce 2017 results, Barclays, made a splash with improved guidance on 2018 dividends and hints at share buybacks.

“This helped shift investor attention away from a reported £1.9bn loss, a figure which reflects some substantial exceptional items. Pre-tax profit before one-off items was up 10% to more than £3.5bn.

“A key risk which needs to be weighed when looking at the stock is the ongoing Serious Fraud Office investigation into its emergency funding deal with Qatar in 2008.

“In the worst of all worlds this could see the company stripped of its banking licences, although the market appears to be dismissing this doomsday scenario for now.”

Anglo American

“The recovery in commodity markets which underpinned strong results from Glencore this week, also boosts the 2017 performance of its peer Anglo American.

“But it looks like investors were already pricing in a stellar set of numbers, the shares were up by nearly a quarter in the three months to last night’s close, and the stock trades lower in response.

“Free cash flow is up 93% to $4.9bn and net debt is down some 47% at $4.5bn, way ahead of target. This helps drive a full year dividend of $1.02, after the payout was reintroduced earlier than expected at the half year stage.

“The drastic improvement reflects both higher prices for the resources Anglo produces and significant efforts to streamline the business in the wake of 2014’s commodities crash.”

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