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LONDON MARKET CLOSE: Stocks End Lower As UK Wage Growth Disappoints

LONDON (Alliance News) - Stocks in London ended lower on Wednesday with miners weighing on the ...

Alliance News 13 September, 2017 | 5:10PM
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LONDON (Alliance News) - Stocks in London ended lower on Wednesday with miners weighing on the FTSE 100 as the pound held onto gains despite sluggish UK wage growth, on the eve of the Bank of England's monetary policy decision on Thursday.

The FTSE 100 index closed down 0.3%, or 20.99 points, at 7,379.70. The FTSE 250 ended down 0.4%, or 71.96 points, at 19,593.91, and the AIM All-Share closed down 0.2%, or 2.33 points, at 1,006.55.

The BATS UK 100 ended down 0.2% at 12,556.01, the BATS 250 closed down 0.4% at 17,827.15, and the BATS Small Companies ended up at 0.% at 12,285.26.

The UK jobless rate dropped unexpectedly in the three months to July, data from the Office for National Statistics showed Wednesday.

The jobless rate fell to 4.3%, the lowest since 1975, the ONS said. Economists had forecast the rate to remain unchanged at 4.4%, as seen in the three months to June. There were 1.46 million unemployed people in the May to July period, down by 75,000 from the three months to April.

The employment rate came in at 75.3%, the highest since records began in 1971.

However, average earnings including bonus disappointed, climbing 2.1% from the previous year, slower than the expected rate of 2.3%.

"The FTSE has tried its best to regain lost ground today, with the hawkish connotations associated with Tuesday's rise in UK inflation driving early losses. The failure of UK wage growth to keep up with the incessant rise in UK inflation is creating a widening gap which will drive down real incomes, hurting consumption driven economic growth. The UK economy remains the ongoing theme of the week, with the Bank of England expected to provide a more hawkish statement at tomorrow's meeting," said IG Group analyst Chris Beauchamp.

The pound was quoted at USD1.3208 at the London equities close, compared to USD1.3272 at the same time on Tuesday. Sterling had touched its highest level since last September at USD1.3329, before falling back as the wage figures came in below expectations.

Also in focus on Thursday is the Bank of England's "Super Thursday" where the central bank will announce its latest policy decision at 1200 BST, alongside the release of minutes from the Monetary Policy Committee meeting, which is being held on Wednesday. There will be no press conference with Governor Mark Carney on Thursday.

The BoE is expected to keep UK interest rates unchanged, though focus will be drawn to Chief Economist Andrew Haldane's vote, as some economists believe his hawkish comments over the summer could this time result in a vote for an interest rate hike.

"The forex markets, specifically the pound and dollar, look set to dominate tomorrow as well. The morning brings the meat of a Bank of England get together, and while a rate hike seems extremely unlikely, investors will be on the lookout for hints as to what might force the central bank to act in the coming months," said Spreadex analyst Connor Campbell.

The euro stood at USD1.1892 at the European equities close, against USD1.1960 the prior day.

In Paris the CAC 40 ended up 0.2%, and the DAX 30 in Frankfurt ended up 0.2%.

Stocks in New York were marginally lower at the London equities close. The DJIA and the S&P 500 index were both flat and the Nasdaq Composite was down 0.1%.

"Today's moves are nothing to get alarmed about, there hasn't been any macroeconomic news that has soured sentiment, I would just say that investors have momentarily lost their appetite for the time being," CMC Markets analyst David Madden noted.

On the London Stock Exchange easyJet ended as the best performer, up 1.8%. The low-cost carrier announced the launch of a new connections service, "Worldwide by easyJet", intended to allow customers to "seamlessly" connect their easyJet flight with partner airline flights.

The service will allow easyJet passengers to connect with other easyJet flights through Gatwick Airport, south of London.

Launch partners for the service are fellow budget carriers WestJet Airlines and Norwegian Air Shuttle at Gatwick Airport, and easyJet intends to sign other airlines up to the service, with talks already "far advanced with Middle Eastern and Far Eastern carriers", among others.

As well as adding partners at Gatwick Airport, easyJet plans to expand to other key airports in Europe such as Milan Malpensa, Geneva, Amsterdam, Charles De Gaulle in Paris, and Barcelona.

Conversely, mining stocks weighed on the FTSE 100 due to weak metal prices. The FTSE 350 Mining Sector Index ended down 2.3%.

"In London, miners like Rio Tinto, BHP Billiton, Anglo American, and Glencore are offside due to the large drop in the price of copper. The red metal is under pressure today as there are reports of heavy selling from commodity funds," said CMC's Madden.

Supermarket giant Tesco ended down 2.0% after being cut to Underperform from Neutral by Exane BNP.

In the FTSE 250, Dunelm Group ended the session as the best performer, closing 9.4% higher after it said it has seen an "encouraging" start to its new financial year, although it expects the trading climate to remain challenging, as investments and its Worldstores acquisition hit profit for its recently-ended financial year.

The homewares retailer reported a pretax profit of GBP92.4 million for the 52 weeks ended July 1, down from GBP128.9 million the prior year, as a rise in revenue to GBP955.6 million from GBP880.9 million was offset by a step up in operating costs to GBP372.3 million from GBP309.2 million.

Dunelm attributed the dip in profit to expected losses from its Worldstores business, acquired in November 2016, increased investment, and a small fall in like-for-like store sales.

Like-for-like sales were 0.5% lower in the period, but online sales grew 24%, "demonstrating the changing pattern of customer shopping habits".

N+1 Singer analyst Matthew McEachran said Dunelm's "update and positive start to the first quarter underpins our assessment that the recent sell off and inflection point represent a great entry point for this stock", adding that "a significant amount of infrastructure and investment work is now bedded in which is a key factor behind better forward looking prospects versus historical growth, especially online".

At the bottom of the midcap index, Travis Perkins closed down 3.7% after Bernstein started coverage on the builders' merchant with an Underperform rating.

Brent oil was quoted at USD54.43 a barrel at the close from USD54.27 at the London equities close Tuesday. The firm oil price provided a boost to the blue-chip oil majors ending among the risers with Royal Dutch Shell 'A' shares ending up 1.1%, Shell's 'B' shares closing up 1.1% and BP closing up 1.0%.

"WTI and Brent Crude oil are higher on the day as traders are mindful that Saudi Arabia is talking about extending the production freeze until the end of June 2018. Also, production from OPEC members dropped last month, and this is further evidence that the group are serious about curtailing output," CMC's Madden noted.

Gold was a touch lower, quoted at USD1,322.54 an ounce against USD1,325.89 at the equities close Tuesday.

The economic calendar on Thursday, alongside the BoE's "Super Thursday" sees retail sales from China at 0300 BST as well as consumer price inflation figures for August from Italy at 0900 BST and from the US at 1330 BST.

In the UK corporate calendar on Thursday are half-year results from blue-chips Next and WM Morrison Supermarkets and midcap Spire Healthcare Group, while wholesaler Booker Group, which is in the process of being acquired by Tesco, releases a trading statement.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com; @ArvindBhunjun

Copyright 2017 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar
Rating
Dunelm Group PLC 688.00 GBX -0.22 -
BP PLC 493.10 GBX 0.40
Travis Perkins PLC 1,464.00 GBX -0.54 -
easyJet PLC 1,281.00 GBX -1.08 -
Royal Dutch Shell PLC B 2,373.00 GBX -0.23
Royal Dutch Shell PLC Class A 2,337.50 GBX 0.28 -
Tesco PLC 184.70 GBX 0.19
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