LONDON MARKET CLOSE: FTSE 100 Tanks As Pound Surges And UK Banks Slide

(Alliance News) - UK banks and a stronger pound weighed on the FTSE 100 on Thursday, with the market mood downbeat as disappointing US jobless claims served as a reminder that the short-term global economic outlook remains challenging.

The internationally-exposed FTSE 100 index closed down 93.75 points, or 1.4%, at 6,617.15. The FTSE 250 ended down 215.62 points, or 1.0%, at 20,933.87, and the AIM All-Share closed down 17.24 points, or 0.4%, at 1,205.88.

The Cboe UK 100 ended down 1.6% at 657.09, the Cboe UK 250 closed down 1.0% at 18,513.76, and the Cboe Small Companies ended down 0.4% at 12,768.78.

In European equities on Thursday, the CAC 40 in Paris ended down 0.7%, while the DAX 30 in Frankfurt ended down 0.2%.

"Given their recent levels, it's not really a surprise that certain markets were in danger of moving sharply lower at the slightest provocation," said Connor Campbell at Spreadex, noting a deterioration in US weekly jobless claims.

The number of US workers filing for first-time unemployment benefits unexpectedly rose last week amid a lack of fiscal support, the latest figures from the Department of Labor showed on Thursday.

For the week ending February 13, initial claims were 861,000, an increase of 13,000 from the previous week's revised figure of 848,000. The latest print was higher than the market forecast, cited by FXStreet, of 765,000 claims.

US President Joe Biden's USD1.9 trillion economic rescue package remains in Congress, awaiting passage.

This ensured Wall Street started Thursday's session on the back foot. Stocks in New York were lower at the London equities close, with the DJIA down 0.8%, the S&P 500 index down 0.8%, and the Nasdaq Composite down 1.2%.

Spreadex's Campbell said: "A combination of doubts introduced by the Dow Jones, and the ascension of sterling, left the FTSE as far and away Thursday's worst performer."

Sterling was trading around its best levels since April 2018. The pound was quoted at USD1.3955 at the London equities close Thursday, compared to USD1.3845 at the close on Wednesday.

Fawad Razaqzada, market analyst at ThinkMarkets, said the pound is "shining brightly".

"Like the US, bond yields in the UK have been rising, especially after a no-deal Brexit was avoided at the back end of last year. The UK is currently well ahead of many countries in the race to vaccinate its population. Together, these developments have boosted expectations that the UK economy could potentially recover quicker and stronger once lockdowns end," said Razaqzada.

UK Prime Minister Boris Johnson is awaiting new data on the effects of vaccines on coronavirus after stressing he will take a "cautious and prudent approach" to easing England's national lockdown.

The prime minister is understood to be expecting updated evidence of jabs' effect on hospital admissions and deaths to be with him by the end of Friday, ahead of setting out his "road map" next week. But it was unclear whether the early data would include vaccines' effect on transmission, with the results of two key Public Health England studies possibly not available until next month.

Johnson stressed on Wednesday that any easing of restrictions needs to be in stages and in an "irreversible" way as he was urged to focus on the evidence rather than deadlines when lifting restrictions.

The euro stood at USD1.2076 at the European equities close Thursday, up against USD1.2036 at the same time on Wednesday.

Against the yen, the dollar fell to JPY105.72 compared to JPY105.82 late Wednesday.

Brent oil was quoted at USD64.49 a barrel at the London equities close Thursday, rising from USD63.53 late Wednesday. Gold firmed at USD1,776.28 an ounce at the London equities close Thursday against USD1,774.53 at the close on Wednesday.

In London, banks ended Thursday's session in the red, dragged down as Barclays kicked off the full-year reporting season for UK banks. Barclays shares ended down 4.4%.

"On the face of it you might have expected a round of applause for Barclays fourth quarter results...Instead the company got the cold shoulder from the market as attention was drawn by large provisions on Covid-related bad debt and a warning of a continuing impact through the course of 2021," said AJ Bell investment director Russ Mould.

For 2020, Barclays posted net income of GBP21.77 billion, up 1% from GBP21.63 billion in 2019, as net interest income fell 14% to GBP8.12 billion from GBP9.41 billion. Pretax profit sank 30% to GBP3.07 billion from GBP4.36 billion. However, the figure beat company-compiled consensus which forecast a pretax profit of GBP2.81 billion.

Barclays booked GBP4.84 billion in credit impairments in 2020, more than doubled from GBP1.91 billion in 2019.

The lender declared a dividend of 1.0 pence for 2020, down from 3.0p paid in 2019. In addition, Barclays said it intends to initiate a share buyback of up to GBP700 million, which is expected to commence in the first quarter of 2021.

AJ Bell's Mould added: "There may also have been some disappointment at the pretty nominal nature of the dividend – though anyone who thought payouts were going straight back to pre-pandemic levels in a hurry wasn't paying attention."

The banking sector ended lower, with NatWest - due to report its own 2020 results on Friday - slipping 3.9%, Lloyds Group ending down 3.7% and HSBC shedding 3.0%.

Also weighing on the FTSE 100 was Smith & Nephew, sliding 5.9% as it posted a fall in profit for 2020.

For the year, Smith & Nephew posted trading profit of USD683 million, almost halved from the USD1.17 billion recorded for 2019. This was as revenue fell 11% to USD4.56 billion from USD5.14 billion. Pretax profit was GBP246 million, down 67% from GBP743 million.

S&N declared a full-year dividend of 37.5 US cents per share, unchanged from 2019, reflecting "confidence in the business and strength of the balance sheet".

Looking ahead, the company said the outlook reflects the likely continuation of Covid-19 effects during the first half of 2021 and the uncertainty regarding the timing and pace of recovery.

Moneysupermarket.com and Indivior were top and tailing the FTSE 250.

Shares in Moneysupermarket.com rose 7.1% as the Chester, England-headquartered price comparison website reported a sharp drop in annual profit, but was able to maintain its dividend.

For 2020, Moneysupermarket recorded pretax profit of GBP87.8 million, down 24% from GBP116.0 million in 2019. Active users dipped to 11.5 million from 13.1 million, while revenue per active user fell to GBP16.19 from GBP16.40.

Moneysupermarket maintained its annual dividend at 11.71p.

Indivior, meanwhile, slumped 6.5% as it said the possibility remains that 2021 will be significantly hurt by the Covid-19 pandemic.

For 2020, Invidior swung to a pretax loss of USD173 million from a USD180 million profit recorded on 2019. This was as net revenue fell 18% year-on-year to USD647 million from USD785 million amid competition from cheaper generic drugs to treat opioid dependence as well as disruption from the pandemic.

Looking ahead, Slough-based Indivior said: "Base case net revenue guidance assumes the operating backdrop will improve in first half 2021, as Covid-19 pandemic restrictions impacting in-person healthcare practitioner access subside and healthcare systems approach normality. In a downside scenario in which the operating backdrop continues to be adversely impacted by pandemic restrictions through second half 2021, Indivior believes total net revenue for 2021 could be adversely impacted by up to USD60 million. On this basis, total net revenue could be around USD565 million."

The UK corporate calendar on Friday has full-year results from lender NatWest and property investor Segro.

In the economic calendar for Friday, UK retail sales are at 0700 GMT with German producer prices due at the same time. There are then PMIs due for Germany, the eurozone and the UK at 0830 GMT, 0900 GMT and 0930 GMT respectively. The US PMI is out at 1445 GMT.

By Lucy Heming; lucyheming@alliancenews.com

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