LONDON MARKET CLOSE: Stocks End Mixed As China GDP Fails To Inspire

LONDON (Alliance News) - Stocks in London ended mixed on Wednesday shrugging off positive ...

Alliance News 17 April, 2019 | 5:02PM
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LONDON (Alliance News) - Stocks in London ended mixed on Wednesday shrugging off positive economic growth figures from China, as declines from Bunzl and miners weighed on the FTSE 100.

The FTSE 100 index closed up just 1.40 points at 7,471.32. The FTSE 250 ended down 0.3%, or 65.25 points, at 19,858.13, and the AIM All-Share closed up 0.7%, or 6.40 points, at 957.45.

The Cboe UK 100 closed flat at 12,674.31, the Cboe UK 250 down 0.4% at 17,786.46, and the Cboe UK Small Companies up 0.1% at 11,425.14.

In Paris the CAC 40 ended up 0.6%, while the DAX 30 in Frankfurt ended up 0.5%.

"The FTSE 100 is underperforming the rest of Europe as the mining sector is holding the London equity benchmark back. The DAX and the CAC 40 have hit fresh six month highs as traders latched onto the stronger-than-expected growth figures from China," said CMC Markets analyst David Madden.

China's GDP grew an annual 6.4% in the first quarter of 2019 - unchanged from fourth quarter and beating forecasts for 6.3%.

However, the positive GDP figures were not enough to facilitate significant stock market upside in the UK.

"Reported real GDP growth held steady at 6.4%, defying expectations of a slowdown amid downward pressures in early 2019. Overall growth in industry picked up significantly in March from the first two months, helped by stronger exports and investment, and housing activity surprised on the upside. That said, growth momentum of exports, investment and consumption all slowed in the first quarter as a whole," said analysts at Oxford Economics.

On the London Stock Exchange, Bunzl was the worst blue chip performer, down 9.3% 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.

"It was a rare miss from Bunzl, as the shares dropped following a warning about weaker growth in its North American market. Having hit an all-time high just two months ago the shares look rather fully-valued, and investors will be hoping that today's update is a one-off rather than the beginning of something more extensive," said IG Group's Chris Beauchamp.

Rio Tinto closed down 2.7% 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 ended the worst midcap performer, down 5.3%.

Mediclinic International ended the best performer in the FTSE 250, up 7.8%. 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 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 Madden.

The pound was quoted at USD1.3045 at the London equities close, flat compared to USD1.3050 at the 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.

The euro stood at USD1.1298 at the European equities close, against USD1.1292 late 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, 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 at the London equities close were broadly lower, with the DJIA and the S&P 500 index both down 0.1% and the Nasdaq Composite flat.

On the corporate front, Morgan Stanley reported first-quarter earnings that beat analysts' estimates as it reported earnings of USD1.39 per share compared with USD1.45 per share a year ago. Total earnings declined 9% year-over-year to USD2.34 billion.

During the quarter, it recorded certain tax benefits of USD101 million, or USD0.06 per share. Excluding this, earnings were USD1.33 per share.

On average, 20 analysts polled by Thomson Reuters expected the company to report profit per share of USD1.16 for the quarter. Analysts' estimates typically exclude special items. Wealth Management delivered pretax income of USD1.2 billion reflecting strong expense management.

The stock was up 2.7% in New York.

PepsiCo was up 2.9% on Wall Street after the soft drinks maker 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.

Conversely, IBM was down 2.9% after the tech giant reported a profit for the first quarter that trumped Wall Street estimates, however revenue fell short of expectations.

IBM's first-quarter revenue rose to USD18.18 billion from USD19.07 billion last year. Analysts polled by Thomson Reuters expected revenue of USD18.51 billion for the quarter.

On the US economic front, a report released by the Commerce Department showed the US trade deficit unexpectedly narrowed in the month of February amid a jump in the value of exports.

The Commerce Department said the trade deficit narrowed to USD49.4 billion in February from USD51.1 billion in January, while economists had expected the deficit to widen to USD53.5 billion.

Brent oil was quoted at USD71.60 a barrel at the London equities close, up from USD71.12 at the close Tuesday.

Oil prices inched higher after the Energy Information Administration reported inventories fell by 1.4 million barrels in week to April 12, compared to analysts' expectations for an increase of 1.7 million barrels.

Gold was quoted at USD1,274.52 an ounce at the London equities close, flat against USD1,275.05 late Tuesday.

The economic events calendar on Thursday has services PMI readings from Germany and the eurozone at 0830 BST and 0900 BST respectively and UK retail sales numbers at 0930 BST. In the afternoon there are US retail sales at 1330 BST and US services PMI at 1445 BST.

The UK corporate calendar on Thursday has first quarter results from consumer goods giant Unilever and pest control firm Rentokil Initial. There is also a trading statement from personal care products maker PZ Cussons.

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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