LONDON MARKET MIDDAY: Stocks Sluggish As Bunzl And Miners Hinder FTSE

LONDON (Alliance News) - Stocks in London were mixed at midday on Wednesday, with Bunzl and ...

Alliance News 17 April, 2019 | 11:55AM
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LONDON (Alliance News) - Stocks in London were mixed at midday on Wednesday, with Bunzl and heavyweight mining stocks weighing on the FTSE 100.

The FTSE 100 index was down just 0.69 points at 7,469.23.

The FTSE 250 was up 4.60 points at 19,928.04, and the AIM All-Share was up 0.3%, or 3.06 points, at 954.11.

The Cboe UK 100 index was flat at 12,677.21. The Cboe UK 250 was up 0.1% at 17,72.80, and the Cboe UK Small Companies was up 0.1% at 11,421.88.

"European markets are mixed this morning, with the FTSE 100 initially being dragged lower by Bunzl shares but then slowly recovering. Utility and mining companies were also a drag on the London index, the former on concerns of slow economic growth in the UK, the latter on global growth concerns," said City Index analyst Fiona Cincotta.

On the London Stock Exchange, Bunzl was the worst blue-chip performer, down 9.5%, after the distribution group said underlying revenue growth slowed over the first-quarter as a result of mixed macroeconomic and market conditions.

Bunzl said first-quarter revenue increased 4% at actual exchange rates. At constant exchange rates revenue, adjusted for the impact of the number of trading days in the quarter, rose by 2.5%.

However, the rate of revenue growth slowed down during the quarter, the company said, due to "mixed macroeconomic and market conditions" across the countries in which the group operates.

In particular, Bunzl's business in its key North America market experienced "slower underlying growth of approximately 1%" due to lower sales to customers in the grocery and retail sectors.

AJ Bell's Russ Mould commented: "Bunzl calls itself 'GDP-plus', meaning its earnings should grow in excess of GDP in the countries in which it operates. Analysts should have already factored in slowing GDP growth to their earnings forecasts because of plentiful signs of economic weakness around the world.

"Yet life is much worse than expected for Bunzl judging by its sharp share price decline on the news."

Rio Tinto was down 2.8% after Investec downgraded the Anglo-Australian miner to Hold from Buy.

On Tuesday, Rio Tinto reported a 14% decline in iron ore shipments for the first quarter of 2019 due to weather disruptions by Tropical Cyclone Veronica in March and a fire at Cape Lambert A in January. The mining giant also lowered its 2019 outlook for Pilbara shipments.

BHP Group was down 2.6% after the Anglo-Australian miner reduced its own annual iron ore production guidance after a cyclone affected its operations, as it reported third-quarter production results.

BHP's third-quarter production, in the three months to March, fell 3% year-on-year and on the prior quarter to 56 million tonnes.

BHP cut its iron ore guidance for its year ending June to between 235 million tonnes and 239 million tonnes from between 241 and 250 million tonnes previously.

Akin to rival Rio Tinto, BHP was forced to reduce its output forecast following the disruption caused by Cyclone Veronica in March. In financial 2018, iron ore production was 238.4 million tonnes.

Moreover, sentiment towards miners took a hit after the world's biggest iron ore producer Vale maintained its sales guidance for the steelmaking raw material and said it expects to resume operations at the Brucutu mine within 72 hours.

Vale had declared force majeure over a number of iron ore and pellets sales contracts after Brucutu was suspended in February, in the fallout from the fatal Brumadinho tailings dam failure in January that killed hundreds of people.

London-listed iron pellet producer Ferrexpo was the worst midcap performer, down 4.9%.

Mediclinic International was the best performer in the FTSE 250, up 7.7%. The private hospital group expects a rise in revenue on acquisitions amid continued expansion.

For the year ended March, Mediclinic expects to record 2.0% growth in reported revenue but a 3.5% drop in earnings before interest, taxes, depreciation and amortisation. In financial 2018, Ebitda stood at GBP515 million on revenue of GBP2.87 billion. On a constant currency basis, revenue is expected to grow by 3.5% and Ebitda down around 1.5%.

"Mediclinic shares are in demand today after the company said that underlying earnings are tipped to decline by 3.5%, and that compares with the 4.8% fall equity analysts had estimated. The firm is experiencing revenue growth in all regions, but it cited tougher regulations in Switzerland as a reason for lower earnings," said CMC Markets analyst David Madden.

The pound was quoted at USD1.3043 at midday, compared to USD1.3050 at the London equities close Tuesday, after data showed UK inflation held steady.

UK consumer price inflation was unchanged in March, defying expectations for a modest acceleration, preliminary data from the Office for National Statistics showed on Wednesday.

The consumer price index rose 1.9% on an annual basis - unchanged from February's reading. Economists had expected inflation of 2.0%.

The Bank of England targets inflation - the rate of price increases - at 2.0%.

The core inflation rate was also unchanged in March, at 1.8%. Economists were looking for 1.9% price growth.

On a month-on-month basis, inflation rose 0.2% in March, in line with economists' expectations.

"The rest of this year looks set to be a fairly benign period for consumer price inflation, and in principle, this gives the BoE another reason to keep rates on hold for the time being. However, wage growth has been a larger consideration for policymakers and has continued to perform strongly," said ING economist James Smith.

"Regular pay is growing close to its fastest rate since the crisis as skill shortages intensify, albeit there are some subtle signs that momentum has eased slightly in the more recent readings. This makes for a better fundamental backdrop for consumer spending," he added.

In Paris, the CAC 40 was up 0.1%, while the DAX 30 in Frankfurt was down 0.1%.

The euro stood at USD1.1307, up from USD1.1292 at the European equities close Tuesday.

In economic news from the continent, eurozone headline inflation slowed in March and core price growth eased to its lowest level in a year, as initially estimated, latest data from Eurostat confirmed.

Headline inflation slowed to 1.4% from 1.5% in February. In January, price growth was 1.4%. The European Central Bank aims to maintain inflation rates below, "but close" to, 2.0%.

Compared to the previous month, inflation rose 1.0%.

Core inflation, which excludes prices of energy, food, alcohol and tobacco, eased to 0.8% in March from 1.0% in February. The core inflation rate was the lowest since April 2018, when it was at 0.7%.

Stocks in New York were called for a higher open with banking giant Morgan Stanley set to report earnings before the opening bell.

The DJIA was called up 0.1%, the S&P 500 index up 0.2% and the Nasdaq Composite up 0.3%.

Morgan Stanley has been working since the financial crisis to revamp its business mix away from risky sources of earnings and instead rely on fee-generating businesses which require less capital.

The bank is still chasing lucrative deals and will be sharing the top spot with Goldman Sachs on the forthcoming blockbuster initial public offering for hail ride company Uber - which could be worth USD100 billion.

Already out, soft drinks maker PepsiCo reported a profit for its first quarter that increased from the same period last year.

The company's bottom line totalled USD1.41 billion, or USD1.00 per share. This compares with USD1.34 billion, or USD0.94 per share, in last year's first quarter. Pepsi's revenue for the quarter rose 2.5% to USD12.88 billion from USD12.56 billion last year.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar Rating
Bunzl PLC 2,175.00 GBX 1.40
Ferrexpo PLC 265.10 GBX 0.45 -
Mediclinic International PLC 334.80 GBX 0.27 -
Rio Tinto PLC 4,851.00 GBX 1.49
BHP Group PLC 2,028.50 GBX 1.57
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