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LONDON MARKET CLOSE: Miners And Insurance Stocks Send FTSE 100 Lower

LONDON (Alliance News) - Stocks in London ended mixed on Thursday, with insurers and miners ...

Alliance News 7 December, 2017 | 5:04PM
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LONDON (Alliance News) - Stocks in London ended mixed on Thursday, with insurers and miners dragging the FTSE 100 lower, while UK Prime Minster Theresa May faces a race against time to appease all sides and come up with acceptable Brexit proposals before next week.

The FTSE 100 index closed down 0.3%, or 18.14 points at 7,329.89. The FTSE 250 ended down 8.30 points, at 19,820.64, and the AIM All-Share closed up 0.1%, or 0.63 points, at 1,012.16.

The BATS UK 100 ended down 0.4% at 12,433.17, the BATS 250 closed flat at 18,007.09, and the BATS Small Companies ended 0.1% lower at 12,364.22.

"The FTSE 100 has suffered at the hands of a strengthening pound and weak session for insurance firms and miners," noted IG market analyst Joshua Mahony.

The FTSE 350 Non-life Insurance sector, which houses London's insurance providers, closed down 1.1%, while the FTSE 350 Metals & Mining sector ended 0.7% lower.

"The mining sector is under pressure as iron ore futures and coke futures in China fell by 7.5% and 8% respectively – both hit their daily downward limit. Traders were concerned about declining demand during winter. Stocks like Rio Tinto, Anglo American and Vedanta Resources fell today," CMC Markets analyst David Madden said.

Rio Tinto closed down 1.7%, Anglo American down 0.9%, and Vedanta down 2.6%.

In the latest Brexit developments, May has until Sunday to come to Brussels with new Brexit proposals, to leave enough time for discussions on future trade relations to begin next week, the European Commission says.

The EU wants clarity on three key aspects of Britain's departure before agreeing to start talks on future relations - a step that London hopes to achieve at a summit of EU leaders on December 14-15.

But May's proposals have become mired in domestic opposition.

Talks between Brussels and London are still ongoing, but so far there is "no white smoke," said commission spokesman Margaritis Schinas, adding that May would have to come back with proposals "this week."

"In this building we work for a full week 24/7, and our week includes Sunday," he noted. Time is of the essence, with Britain set to leave the bloc in March 2019.

The pound was higher quoted at USD1.3417 at the London equities close, compared to USD1.3379 at the London equities close Wednesday, after taking a knock earlier in the week as a deadlock over the Irish border proved a roadblock in advancing Brexit negotiations on to the next stage.

"Questions still hang over the UK government's position when it comes to the Brexit negotiations. The talks are being held up over discussions in relation to the Irish border, and until there is progress on the issues, it is possible the pound could remain under pressure. The wider upward trend that has been in place since March is still intact, so further decline could encourage fresh buying," said CMC's Madden.

In UK economic news, data from the mortgage lender Halifax and IHS Markit showed that UK house prices increased more than expected in November.

On a monthly basis, house prices increased 0.5%, faster than the 0.3% rise posted in October. This was the fifth consecutive increase. Prices were forecast to grow marginally by 0.2%.

In Paris the CAC 40 ended up 0.2%, while the DAX 30 in Frankfurt ended up 0.4%.

The euro was firm at USD1.1794 at the European equities close, against USD1.1781 the prior day, after data showed euro area economy expanded in the third quarter largely on investment and exports, Eurostat reported.

Gross domestic product grew 0.6% sequentially, slightly slower than the 0.7% expansion seen in the second quarter. The rate came in line with the estimate released on November 14.

On a yearly basis, GDP advanced 2.6%, which was revised up from the flash estimate of 2.5%.

Exports increased at a faster pace of 1.2% following the second quarter's 1% rise. Meanwhile, quarterly growth in imports slowed to 1.1% from 1.7%.

On the London Stock Exchange, high-street bookmaker Ladbrokes Coral Group and online gambling firm GVC Holdings stole the focus after announcing they are holding talks about a possible merger that would see GVC buy Ladbrokes in a deal worth potentially up to GBP3.90 billion.

Shares in Ladbrokes surged on the news to close up 31%, hitting an all-time high of 182.90p in early trade, and adding around GBP797 million to its total market value during Thursday's trading alone, while shares in GVC ended 5.6% higher.

The non-binding proposal is for GVC to pay 32.7 pence in cash and issue 0.141 GVC shares for each Ladbrokes share, with a further potential payout of 42.8 pence structured as a contingent value right that will be payable if certain targets are met.

Excluding the potential 42.8 pence deferred payout, the offer values Ladbrokes at 160.9 pence per share, or GBP3.10 billion in total. Including the maximum deferred consideration, the value rises to GBP3.90 billion.

Ladbrokes shareholders would own about 46.5% of the enlarged group, while GVC shareholders would own the other 53.5%.

Continuing the gambling theme, peer William Hill closed up 8.3%, among the best midcap performers, after reaching an agreement with Scientific Games to "unconditionally support" its proposed acquisition of Toronto-listed NYX Gaming Group, in which it already owns a stake.

William Hill owns both ordinary and preference shares in its Canadian peer. William Hill's stake was acquired in 2016 for GBP80 million in order to support NYX's GBP270 million acquisition of software gaming company OpenBet.

In the FTSE 100, soon-to-be demoted defence outsourcer Babcock International was the worst performer, closing down 5.1% after the stock went ex-dividend. This means new buyers no longer qualify for the latest dividend payouts.

Babcock was relegated from London's large cap index and will begin life in the FTSE 250 on December 18, following the FTSE Russell index review changes announced at the end of November.

Stocks in New York were higher at the London equities close. The DJIA was up 0.2%, the S&P 500 index up 0.2%, and the Nasdaq Composite up 0.7%, amid optimism over lawmakers passing a short-term spending bill to avoid a government shutdown.

With a Friday deadline looming, the House is expected to vote later in the day on a "continuing resolution" that funds the government until December 22.

The two-week extension would provide lawmakers with additional time to negotiate a longer-term government spending bill.

In US economic news, the Labor Department released a report unexpectedly showing a modest decrease in first-time claims for US unemployment benefits in the week ended December 2.

The report said initial jobless claims edged down to 236,000, a decrease of 2,000 from the previous week's unrevised level of 238,000. The drop surprised economists, who had expected jobless claims to inch up to 240,000.

On Friday, the Labor Department is scheduled to release its closely watched nonfarm payrolls figures and unemployment report for the month of November at 1330 GMT.

Employment is expected to increase by 200,000 jobs in November after surging up by 261,000 jobs in October. The unemployment rate is expected to hold at 4.1%.

Friday's nonfarm payrolls reading takes on particular significance as nonfarm payroll figures in the last two months were impacted by the effects hurricanes Harvey and Irma, so investors were unable to accurately ascertain the actual health of the US economy.

Notably, it is also the last set of unemployment figures before the US Federal Reserve's final meeting of 2017 next week, where an interest rate hike is on the cards.

"The upcoming Fed Chairman Jerome Powell is on the same page as current Chair Janet Yellen that the US economy appears to be improving because the GDP growth is accelerating," said Think Markets analyst Naeem Aslam.

"The last two quarters have seen the GDP growth of 3%, but the current quarter may not grow as strongly as the previous one. Especially, when you question the fact that if the 3% GDP growth in the previous quarter had any residual effects of the quarter before. We do think that the Fed is going to increase the interest rate coming next week," Aslam added.

Gold fell to its lowest level in four months ahead of the US jobs report and upcoming rate decision, quoted at USD1,253.29 an ounce at the London equities close against USD1,263.21 on Wednesday.

Brent oil was firm, quoted at USD61.87 a barrel at the equities close from USD61.63 at the London equities close Wednesday.

In the economic calendar on Friday, alongside the key US jobs report, there is trade data from China and from Germany at 0200 GMT and 0700 GMT respectively. There are also UK industrial and manufacturing figures at 0930 GMT and eurozone inflation reading for November at 1000 GMT.

In a light UK corporate calendar on Friday there are half year results from blue-chip housebuilder Berkeley Group Holdings and a trading statement from midcap infrastructure project manager John Laing Group.

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
Ladbrokes Coral Group PLC 171.40 GBX 0.35 -
William Hill PLC 312.00 GBX -0.32 -
Vedanta Resources PLC 723.00 GBX 4.78 -
GVC Holdings PLC 928.00 GBX 0.16 -
Babcock International Group PLC 684.50 GBX 1.41 -
Anglo American PLC 1,410.00 GBX 1.55
Rio Tinto PLC 3,624.50 GBX 1.75
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