LONDON MARKET CLOSE: FTSE 100 Slides As Dollar Falls On CPI, Tillerson

LONDON (Alliance News) - Losses on the FTSE 100 accelerated Tuesday afternoon to end the ...

Alliance News 13 March, 2018 | 4:58PM
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LONDON (Alliance News) - Losses on the FTSE 100 accelerated Tuesday afternoon to end the session sharply lower, with the FTSE 250 following suit.

Having spent the morning posting small losses, the dollar-earner heavy FTSE 100 in the afternoon dropped as the greenback fell against the pound following the latest US consumer price index data, as well as news of the departure of US Secretary of State Rex Tillerson.

Meanwhile, convenience food maker Greencore provided a significant drag on the FTSE 250, along with TP ICAP and Computacenter.

The FTSE 100 index closed down 1.1%, or 75.98 points, at 7,138.78. The FTSE 250 ended down 1.3%, or 254.30 points, at 19,863.23, and the AIM All-Share closed down 0.7%, or 7.43 points, at 1,042.98.

The BATS UK 100 ended down 1.1% at 12,102.85, the BATS 250 closed down 1.3% at 18,073.16, and the BATS Small Companies ended down 0.1% at 12,294.38.

In European equities on Tuesday, the CAC 40 in Paris ended down 0.6%, while the DAX 30 in Frankfurt ended down 1.6%.

"The recent outbreak of bullishness has taken something of a knock today, and it's not hard to find the culprits. US CPI came in bang in line with forecasts, but evidently there were plenty of dollar bulls who had been expecting more, especially from the core figure," said IG chief market analyst Chris Beauchamp.

Ahead of the Federal Reserve's meeting next week, the Labor Department on Tuesday showed CPI rose in line with forecasts in February. CPI rose by 0.2% month-on-month in February after climbing by 0.5% in January.

Annually, consumer prices were up by 2.2% in February, reflecting a modest acceleration from the 2.1% increase in January. Core consumer prices were up by 1.8% year-on-year, unchanged from the annual rate of growth seen in the previous month.

"The beleaguered euro and sterling both got a lift, and this sent home markets into a tailspin. As the session entered its final hour in London the FTSE continued to plumb new depths," IG's Beauchamp added.

The pound was quoted at USD1.3977 at the London equities close Tuesday, higher compared to USD1.3891 at the close on Monday.

The euro also rose to stand at USD1.2393 at the European equities close Tuesday, against USD1.2312 at the same time on Monday.

As well as US CPI, the dollar was hit by the news of Tillerson's departure. A statement from Under Secretary of State for Public Diplomacy & Public Affairs Steve Goldstein suggested that Tillerson had not seen the decision coming.

"The Secretary had every intention of staying, because of the critical progress made in national security," Goldstein said. "The Secretary did not speak to the president and is unaware of the reason."

Trump announced in a post on Twitter that he intends to replace Tillerson with current CIA Director Mike Pompeo. This follows the resignation of Trump's chief economic advisor Gary Cohn just last week.

The news of Tillerson's firing came during UK Chancellor Phillip Hammond's Spring Statement.

Hammond revealed to the House of Commons on Tuesday that the Office for Budget Responsibility now expects state borrowing to be GBP45.2 billion this year - some GBP4.7 billion lower than predicted in November and GBP108 billion lower than in 2010.

Playing on his own reputation for gloom, Hammond joked: "If there are any Eey-ores in this Chamber, they are over there. I, meanwhile, am at my most positively Tigger-like."

The OBR upgraded its prediction for GDP growth in 2018 from 1.4% to 1.5%. Growth in 2017 was 1.7%, compared with the 1.5% forecast by the OBR last year.

Forecast growth is unchanged at 1.3% in 2019 and 2020, before rising to 1.4% in 2021 and 1.5% in 2022, the chancellor said.

The updated figures showed growth in 2021 and 2022 had been revised down from the respective 1.5% and 1.6% forecast at the November Budget.

Analysts at Bank of America said: "While the Chancellor converted to Tigger the OBR, the official budget forecaster, stayed with Eeyore. Growth over the five year forecast was little changed at a below consensus 1.4%."

The forecasts from the OBR came as the Organisation for Economic Cooperation and Development on Tuesday raised its projection for global economic growth in 2018 to 3.9% from 3.7%.

The OECD said GDP growth in the UK is projected at 1.3% this year and 1.1% in 2019. Growth in the euro area is set to remain robust and broad-based, forecast to grow 2.3% in 2018 and 2.1% in 2019.

The OECD forecast US growth of 2.9% this year, before slowing to 2.8% next year.

Stocks in New York were lower at the London equities close, with the DJIA down 0.3%, the S&P 500 index down 0.3%, and the Nasdaq Composite down 0.8%.

In commodities, Brent oil was quoted at USD64.48 a barrel at the London equities close Tuesday from USD64.29 late Monday.

Gold was quoted at USD1,325.44 an ounce at the London equities close Tuesday against USD1,317.89 at the close on Monday.

Among equities in London on Tuesday, Antofagasta ended as the bigger blue-chip riser, closing up 3.4%.

The Chilean miner on Tuesday declared a full-year dividend of 40.6 cents, above analysts forecasts of a 30 cents payout, bringing its total dividend for the year to 50.90 cents. This compares to a total of just 18.40 cents in 2016.

This was after revenue increased 31% to USD4.75 billion in 2017 from USD3.62 billion in 2016 and pretax profit multiplied to USD1.83 billion from USD284.6 million the year before.

Engineer GKN ended up 1.2% after - citing comments by the pension scheme trustees - it criticised on Tuesday "misleading" comments made by Melrose on Monday with regards to its pensions provision.

Melrose on Monday improved its hostile takeover bid for GKN in a deal valuing the company at GBP8.1 billion from the original GBP7.4 billion.

As part of the offer, Melrose argued the Dana deal, in addition to the potential sale of GKN's powder metallurgy business, would see pension liabilities for GKN's remaining aerospace business stand at 10 times profit. This is more than three times the FTSE 100 average, Melrose argued.

GKN Chief Executive Officer Anne Stevens said on Tuesday: "Melrose's failure to engage effectively with the trustees on such a crucial topic as the future of the GKN pension schemes only confirms our view that Melrose, with its financial buyer model, is not an appropriate owner of GKN."

In response, Melrose on Tuesday said it is in "constructive discussions" with GKN's pension trustees and defended its "exemplary" pensions record. Melrose closed up 1.5%.

Direct Line closed down 2.8% after Deutsche Bank cut the insurer to Hold from Buy.

Dragging on the FTSE 250 on Tuesday was Greencore, closing down 30% after announced a restructuring in its US operations due to low capacity utilisation, with profit growth in the region to be slower than expected.

The one-off cash cost of this restructuring is expected at around GBP3.0 million, and Greencore could book a non-cash asset impairment charge in its current financial year.

Greencore said Chief Executive Patrick Coveney will take a direct role leading Greencore US, spending around half his time there. Greencore US CEO Chris Kirke is leaving the firm, but will ensure a smooth handover.

The sandwich-maker now expects adjusted earnings per share for its year ending September 29 to be between 14.70 pence per share at 15.70p, compared to current market expectations of 15.70p and 16.60p. In its previous year, adjusted earnings per share was 15.40p, a 3.8% drop on its prior year.

Also lower was TP ICAP, closing down 9.5% after it reported pro-forma profit fell during its first full-year as a merged entity of Tullet Prebon and ICAP.

In June 2016, Tullett Prebon and ICAP - now known as NEX Group - agreed for Tulett to acquire the ICAP voice broking and information business. The deal was completed at the end of December 2016.

Reported pretax profit of GBP72.0 million for 2017 was down from GBP167.0 million in 2016, though underlying pretax profit, excluding acquisition costs and exceptional items was GBP233.0 million, up slightly from GBP232.0 million.

Computacenter closed down 8.5% despite seeing pretax profit up 28% to GBP111.7 million in 2017 and revenue up 17% to GBP3.79 billion, though the IT infrastructure company warned growth outlook for 2018 remains "challenging" after such a strong year.

Cairn Energy closed down 8.0% despite swinging to a significant profit in 2017, a year in which two of its assets in the North Sea reached first oil production.

Cairn posted a pretax profit of USD256.4 million for 2017, having recorded a loss of USD151.5 million in 2016. Revenue for 2017 came in at USD33.3 million, with Cairn having posted none in 2016, with oil sales for 2017 at USD19.9 million.

On the Main Market, fashion retailer French Connection closed up 25% after reporting a narrowed loss in its recently ended financial year and saying it is "very close" to achieving profitability.

Revenue in the 12 months to January 31 increased by 0.5% to GBP154.0 million, while its pretax loss narrowed to GBP2.3 million from GBP5.3 million the year prior.

French Connection - in which Sports Direct International holds a 26.99% stake - also said it received an unsolicited takeover approach during the recent year from a US-based company. The UK retailer said it entered a period of discussions and due diligence "over a number of months", but ultimately it did not lead to an offer being made.

"Our goal has been to return the group to profitability, and I believe we are very close to achieving that aim, given the momentum that we are currently seeing within the business," said Chairman & Chief Executive Stephen Marks.

On London's junior AIM market, Fevertree Drinks closed down 3.7% as an in-line set of full-year results disappointed investors.

Pretax profit in 2017 jumped 64% to GBP56.4 million from GBP34.3 million in 2016, as revenue rose 67% to GBP170.2 million from GBP102.2 million.

Fevertree proposed a final dividend of 7.64 pence per share, up 62% from 4.71p the year before. For the full year, the dividend grew 70% to 10.65p from 6.25p the year prior.

Still to come in the economic calendar on Tuesday, the minutes from the Bank of Japan's latest monetary policy meeting will be released at 2350 GMT, while machinery orders are due at the same time.

In Wednesday's economic calendar, Chinese retail sales and industrial production are at 0200 GMT, with German CPI at 0700 GMT. Eurozone industrial production is at 1000 GMT, with employment change due at the same time. In the US, BMA mortgage applications are at 1100 GMT, while retail sales and the produce price index are both due at 1230 GMT.

European Central Bank President Mario Draghi will be speaking at 0800 GMT, with ECB members Peter Praet and Benoit Coeure speaking at 0845 GMT and 1615 GMT respectively

Headlining the corporate calendar on Wednesday are full-year results from insurance and financial services company Prudential, grocer Wm Morrison, funeral services provider Dignity, infrastructure firm Balfour Beatty and drugmaker Hikma Pharmaceuticals.

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
Fevertree Drinks PLC 3,367.00 GBX -0.12 -
French Connection Group PLC 53.25 GBX 0.47 -
Antofagasta PLC 1,008.50 GBX 0.15
Computacenter PLC 1,434.00 GBX -2.05 -
Greencore Group PLC 181.60 GBX -1.52 -
TP ICap PLC 401.50 GBX -1.21 -
GKN PLC
Cairn Energy PLC 222.80 GBX 0.36 -
Melrose Industries PLC 223.00 GBX -3.75 -
Direct Line Insurance Group PLC 343.50 GBX -1.97
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