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London close: FTSE falls as pound hits 18-month high, Primark fails to impress
London stocks had extended their losses for a fourth day on Thursday, dragged lower by a stronger pound and a bout of profit taking as investors sifted through a torrent of trading updates.
The FTSE 100 fell 0.3% to 7,700.96 as the pound rose to its highest level against the dollar since June 2016, up 0.4% to 1.3891 but was flat against the euro to 1.1353. A firmer pound tends to dent the top-flight index as around 70% of its constituent derive most of their earnings from overseas.
IG analyst Chris Beauchamp said the FTSE 100 index was "looking overextended after a remarkable rally from the lows down at 7,300 at the beginning of December", with Brexit discussions now looming once more and a mixed stream of corporate results dampening spirits.
"Nonetheless, from a technical standpoint the breakout above the 7,600 highs of 2017 is a positive sign, and some weakness back in this direction should both take some heat out of the market and also allow others to buy in. At least it makes a change from the relentless grind higher in the US."
IG colleague Joshua Mahoney noted that cryptocurrencies got back in the driving seat, with a resurgence in Bitcoin being joined by a whole plethora of alt-coins. "Fears over the demise of the sector have been rife since their inception, and with back-to-back double digit declines this week, many believed we were seeing the beginning of the end for this latest bubble. However, we are seeing signs of a recovery from here, with a host of money moving back into the crypto space as traders look to take advantage of bargain basement prices."
In corporate news, profit taking hit Royal Mail, which declined after a strong recent run and as it reported on a solid performance over the Christmas trading period,
Retailers were on the lurch lower again as Primark owner Associated British Foods's 3% increase in revenues from the past quarter was not enough to satisfy the market. Strong growth from its Primark clothing retail arm of 9% in the quarter or 7% at constant currencies was better than most of the market and helped offset a big decline in sugar, but was short of some analysts expectations.
Fellow retailer Halfords fell as it reported a rise in third-quarter sales and record sales over Christmas and Black Friday, though growth was slower than in the first half of the year.
GKN slipped as it called Melrose Industries out over its offer statement, saying it was "misleading", after the engineer rejected a sweetened but hostile bid of £7.4bn a day earlier.
Rightmove was hit by a downgrade to 'underweight' at JPMorgan, while Premier Oil was lower after a downgrade to 'hold' by Investec. Metro Bank was weaker as Berenberg initiated coverage of the stock at 'sell'.
Information services giant Experian turned lower even as it reported an 8% improvement in revenue for the three months to 31 December.
Mining giant BHP Billiton lost its earlier gains made when it confirmed that it was looking at offloading its US shale oil business either a trade sale, demerger or public offering. In a quarterly update the company reported a 20% rise in copper production to 429,000 tonnes, iron ore output rose 3% to 62m tonnes, 6% per cent to 48m barrels.
AA was under the cosh as Barclays slashed the price target to 200p from 270p as it lowered its 2019 EBITDA forecasts.
SSE, Compass Group, Shaftesbury and Micro Focus were all in the red as their stock went ex-dividend.
On the upside, Whitbread was in the black as reports that its new activist investor Sachem Head was pushing for a break-up of the Costa Coffee and Premier Inn owner, which offset the company's warning that tough UK conditions were brewing, with sales up just 0.3% in the third quarter. The activist investor was reported by Reuters as having asked the group to consider selling off or floating Costa as a way to boost the value of its individual businesses.
Shares in Evraz jumped after the steelmaker reported that consolidated crude steel output was at 3.5m tonnes during the final three months of 2017, unchanged from the prior quarter. Production of steel products, net of re-rolled products on the other hand, was 5.7% higher on the quarter at 3.3m tonnes.
Infrastructure group Balfour Beatty rallied after saying the recently-enacted US tax changes would lower its effective tax rate on US earnings to 26% from 40% in 2018 and beyond. The boost to earnings per share would be circa 4%, said broker Numis, and adding some 8% to directors valuation.
Hargreaves Lansdown was the standout gainer as Barclays analysts reiterated their 'overweight' stance on the stock and lifted the price target to 2,100p, while Britvic was boosted by an upgrade to 'buy' at Deutsche Bank and its target price to 950p from 700p.
On the data front, the Royal Institution of Chartered Surveyors' monthly house price index rose to +8 in December from 0 in November, which had been the worst reading since March 2013. Economists had been expecting the index to be unchanged.
But the survey found that last year's cut in stamp duty for first-time buyers has done nothing to boost demand, with the new buyer enquiries balance falling to -15 in December from -5 in November.
Market Movers
FTSE 100 (UKX) 7,700.96 -0.32%
FTSE 250 (MCX) 20,665.02 -0.50%
techMARK (TASX) 3,503.42 -0.55%
FTSE 100 - Risers
Hargreaves Lansdown (HL.) 1,919.50p 4.32%
Evraz (EVR) 388.40p 4.10%
Whitbread (WTB) 3,988.00p 3.45%
Coca-Cola HBC AG (CDI) (CCH) 2,412.00p 2.20%
NMC Health (NMC) 3,182.00p 1.46%
Mondi (MNDI) 1,939.00p 1.44%
Johnson Matthey (JMAT) 3,255.00p 1.02%
Sage Group (SGE) 809.60p 1.00%
Aviva (AV.) 532.20p 0.99%
Standard Life Aberdeen (SLA) 438.20p 0.97%
FTSE 100 - Fallers
Associated British Foods (ABF) 2,755.00p -3.57%
SSE (SSE) 1,300.00p -3.13%
Randgold Resources Ltd. (RRS) 7,076.00p -2.18%
Mediclinic International (MDC) 606.20p -2.07%
Burberry Group (BRBY) 1,589.00p -1.88%
Rolls-Royce Holdings (RR.) 883.40p -1.84%
Imperial Brands (IMB) 3,017.50p -1.79%
Hammerson (HMSO) 500.60p -1.69%
Bunzl (BNZL) 2,027.00p -1.60%
National Grid (NG.) 830.60p -1.54%
FTSE 250 - Risers
NewRiver REIT (NRR) 317.50p 6.01%
Daejan Holdings (DJAN) 5,920.00p 2.87%
CYBG (CYBG) 333.40p 2.52%
IG Group Holdings (IGG) 773.00p 2.31%
UBM (UBM) 899.50p 2.16%
Rathbone Brothers (RAT) 2,704.00p 2.03%
Britvic (BVIC) 815.50p 1.94%
Provident Financial (PFG) 711.80p 1.83%
RPC Group (RPC) 802.80p 1.82%
Paragon Banking Group (PAG) 494.80p 1.77%
FTSE 250 - Fallers
AA (AA.) 154.00p -6.75%
Purecircle Limited (DI) (PURE) 441.50p -5.46%
Kier Group (KIE) 1,041.00p -5.10%
International Public Partnerships Ltd. (INPP) 150.00p -4.58%
JD Sports Fashion (JD.) 377.00p -4.36%
Vectura Group (VEC) 111.80p -4.36%
John Laing Infrastructure Fund Ltd (JLIF) 119.20p -4.33%
Capital & Counties Properties (CAPC) 295.40p -4.06%
Merlin Entertainments (MERL) 347.00p -3.93%
Rightmove (RMV) 4,391.00p -3.73%