LONDON MARKET CLOSE: Strong Pound Hinders FTSE 100 But Miners Rise

LONDON (Alliance News) - The rebound exhibited by stocks in Europe on Monday appeared to have ...

Alliance News 13 February, 2018 | 5:05PM
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LONDON (Alliance News) - The rebound exhibited by stocks in Europe on Monday appeared to have run out of steam by Tuesday, with equities in London ending lower.

The dollar-earner heavy FTSE 100 was hindered by a stronger pound, which rose after UK inflation came in above expectations, and offset gains for London-listed miners and travel operator TUI.

The FTSE 100 index closed down 0.1%, or 9.05 points at 7,168.01. The FTSE 250 ended down 0.3%, or 59.25 points, at 19,320.08, and the AIM All-Share closed down 0.45 of a point at 1,016.84.

The BATS UK 100 ended down 0.1% at 12,183.01, the BATS 250 closed down 0.5% at 17,551.29, and the BATS Small Companies ended down 0.1% at 12,135.30.

In European equities on Tuesday, the CAC 40 in Paris ended down 0.6%, while the DAX 30 in Frankfurt ended down 0.7%.

"The recent sell-off came as a deep trauma for a market almost hypnotised by the slow, steady grind higher, and such a shock to the system takes a while to be processed. We are still in the midst of that now, and a relapse into another selling spasm is all too possible," commented IG chief market analyst Chris Beauchamp.

"We wait now for the US CPI reading, which has taken on a new significance as the data point that will either confirm or allay fears about the strength of inflation," Beauchamp added.

The UK Office for National Statistics on Tuesday showed consumer price inflation came in at 3.0% in January, unchanged from the rate seen in December, having been forecast to decline to 2.9%.

Core inflation - which excludes energy, food, alcoholic beverages and tobacco - accelerated to 2.7% from 2.5% in December, above the expected 2.6%. On a monthly basis, consumer prices fell 0.5% compared to expectations of an 0.6% drop.

In a separate report, the ONS said output price inflation eased to 2.8% in January from 3.3% a month ago. The rate was expected to fall more moderately to 3.0%. Likewise, input price inflation slowed to 4.7% from 5.4% in the previous month, having been forecast at 4.1%.

Month-on-month, output prices edged up 0.1% and input prices climbed 0.7%.

The inflation reading came less than a week after the BoE hinted at "somewhat" earlier- and deeper-than-expected rate hikes.

The BoE Monetary Policy Committee on Thursday said it judged that policy would need to be tightened somewhat earlier and by a somewhat greater degree over the forecast period than anticipated in order to return inflation sustainably to the target.

Inflation is forecast to be remain close to 3% by the first quarter of 2018, before slowing to 2.3% by first quarter of 2019. The bank expects inflation to slow marginally to 2.2% by early 2020. The BoE also noted on Thursday the possibility inflation will rise above 3% again in the short term.

The pound was quoted at USD1.3896 at the London equities close Tuesday, having risen as high as USD1.3924 following the release of inflation data, and up compared to USD1.3805 at the close on Monday.

The euro stood at USD1.2363 at the European equities close Tuesday, up against USD1.2272 at the same time on Monday.

Stocks in New York were largely lower at the London equities close, with the DJIA down 0.3%, the S&P 500 index down 0.3%, and the Nasdaq Composite flat.

On Wall Street, snack food and beverage maker PepsiCo reported a net loss for the fourth quarter, reflecting flat year-on-year revenue and a net tax expense related to the recent US tax reform.

However, both revenue and adjusted earnings per share for the quarter beat analysts' estimates. In addition, the company raised its dividend by 15% and announced a new share repurchase program of up to USD15 billion.

Core earnings for the quarter were USD1.31 per share, compared to USD1.20 per share the year prior. On average, analysts polled by Thomson Reuters expected the company to earn USD1.30 per share for the quarter.

On the London Stock Exchange on Tuesday, miners ended among the best performers as they benefited from improving commodity prices. Glencore ended up 2.5%, BHP Billiton up 1.6% and Rio Tinto up 1.5%.

Copper was quoted at USD6,961.79 a tonne at the close on Tuesday, up from USD6,862.00 late Monday.

Gold was quoted at USD1,327.60 an ounce at the London equities close Tuesday against USD1,324.01 at the close on Monday.

Anglo American closed up 1.7% after, as well as benefiting from higher commodity prices on Tuesday, subsidiary Kumba Iron Ore reported a strong performance in 2017. Anglo American owns 68.7% of Kumba.

Kumba said revenue increased by 16% to ZAR46.4 million for the year to December 31 from ZAR40.2 million in 2016, mainly as a result of an 11% rise in the average realised iron ore export price to USD71 per tonne and a 6% higher sales volume.

Pretax profit grew by 44% to ZAR21.7 million from ZAR15.1 million in 2016. Total production increased by 8% to 45.0 million tonnes from 41.5 million tonnes in 2016, despite a challenging first quarter, Kumba said.

In other commodities, Brent oil was quoted at USD62.29 a barrel at the London equities close Tuesday from USD63.35 late Monday.

Travel operator TUI closed up 1.2%. The Anglo-German travel operator reiterated its guidance for its current financial year, following a narrowed loss and strong business growth in its first quarter.

For the quarter to the end of December, the firm reported a pretax loss of EUR72.5 million, narrowed from EUR103.3 million for the same period a year before, as the Hotels & Resorts division nearly doubled its earnings before interest, tax and amortisation to EUR94.4 million from EUR49.2 million.

Revenue for the period grew 8.1% to EUR3.55 billion from EUR3.28 billion the prior year, with sales rising 9.1% in constant currency.

TUI said it will continue to expand its Hotels and Cruises divisions and affirmed its guidance for 3.0% growth in revenue, 10% growth in underlying earning before interest, tax and amortisation on a constant currency basis for the year ending September 30.

"Shareholders are comforted by strong demand for Holidays in the Northern and Central regions, summer already 35% sold (in-line) and continued improvement in destinations such as Turkey and North Africa which had been shunned following acts of terrorism," said Michael van Dulken, head of research at Accendo Markets.

easyJet closed up 1.2% after shares in the low-cost airline were raised to Buy from Neutral by Oddo BHF.

Continuing to drag on the FTSE 250 on Tuesday was Acacia Mining, closing down 3.0% at 160.32 pence. The gold miner dropped as low as 139.90p on Monday after it slumped to an annual loss and skipped paying out a dividend.

Computacenter closed down 5.4%. The information technology infrastructure provider on Tuesday said it has bought back 8.5 million shares at a price of 1,170.00 pence per share, for a total of GBP100.0 million under its previously announced tender offer.

Car dealer Pendragon ended up 14% after it lifted its final dividend following growth in revenue for 2017, though profit fell.

For 2017, Pendragon reported a pretax profit of GBP91.4 million, down 10% from GBP100.4 million the year before, despite revenue rising by 4.5% to GBP4.74 billion from GBP4.53 billion in 2016. Pendragon reported used vehicle sales revenue up 15% on a like-for-like basis in the period despite challenging conditions.

Pendragon declared a final dividend of 0.80 pence per share, up 14% from 0.70p the prior year, bringing its total payout to 1.55p, up 6.9% from 1.45p.

In the UK corporate calendar on Wednesday, soft-drink bottler Coca-Cola HBC and contract-for-difference provider Plus500 report full year results, while housebuilder Galliford Try releases half year results. Irish drugmaker Shire reports full year results at 1200 GMT.

In the economic calendar on Wednesday, German consumer prices are at 0700 GMT with the preliminary reading of fourth quarter GDP due at the same time. This is followed by eurozone GDP at 1000 GMT, alongside industrial production.

In the afternoon, US MBA mortgage applications are at 1200 GMT, followed by retail sales and the consumer price index both at 1330 GMT.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2018 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar
Rating
TUI AG 1,481.00 GBX 1.68 -
Pendragon PLC 26.35 GBX -0.94 -
Glencore PLC 304.55 GBX 2.03
Computacenter PLC 1,558.00 GBX 1.04 -
easyJet PLC 1,564.50 GBX 0.94 -
Acacia Mining PLC 118.70 GBX 2.02 -
Anglo American PLC 1,543.60 GBX 0.09
BHP Billiton PLC 1,634.00 GBX 1.31
Rio Tinto PLC 3,713.50 GBX 1.75
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