LONDON MARKET CLOSE: FTSE 100 down as BP, Shell and AB Foods weigh

(Alliance News) - Stocks in London ended mixed on Thursday with shares in heavyweight energy companies and Associated British Foods weighing on the FTSE 100, while US equity markets staged a comeback after steep declines.

The FTSE 100 index ended up 4.65 points, or 0.1%, at 7,585.01. The mid-cap FTSE 250 index closed up 59.96 points, or 0.3%, at 22,714.98. The AIM All-Share index rose 6.25 points, 0.5%, at 1,155.74.

The Cboe UK 100 index ended down 0.1% at 752.60. The Cboe 250 closed up 0.2% at 20,356.66 and the Cboe Small Companies rose 0.1% to 15,808.54.

The CAC 40 in Paris stock index ended up 0.3%, while the DAX 40 in Frankfurt closed 0.7% higher.

"The pattern of the past few weeks has seen the UK's top index make gains while US stocks struggle, something that has become quite rare in recent years. But that move has been reversed today, and for a second consecutive day the bevy of banks, miners and oil stocks that make up the index's heavyweights is falling back," said IG Group's Chris Beauchamp.

"The theme of money moving to value names from growth stocks has taken a bit of a knock today, but as with the bounce in the US it is not yet clear that today's reversal is going to turn into anything more sustained," Beauchamp added.

In the FTSE 100, Pearson ended the best performer, up 3.5%, after Goldman Sachs promoted the education publisher to its Conviction Buy List - as the investment bank resumed coverage on the stock.

DS Smith closed up 2.2% after the paper and packaging company said its financial performance has remained in line with its expectations since its interim results early in December.

DS Smith made the comment as it set out an accelerated commitment on carbon emissions reduction.

Precious metals miners Fresnillo and Polymetal International closed up 2.7% and 2.3% respectively, tracking spot gold prices higher.

Gold stood at USD1,845.00 an ounce at the London close, firm against USD1,840.20 late Wednesday.

At the other end of the large-caps, Associated British Foods ended the worst performer, down 4.2%, as it said its outlook remains unchanged as input cost inflation was offset by sales growth and strong margins at fast-fashion retailer Primark.

Total sales for the 16 weeks to January 8 stood at GBP5.57 billion, up 16% on a year ago. Driving the growth was AB Foods' retail arm, which houses Primark, where sales jumped 32% to GBP2.67 billion. Grocery, Sugar, Agriculture and Ingredients revenue rose 5% in total to GBP2.90 billion.

"All businesses have experienced inflationary pressures in raw materials, commodities, supply chain and energy. Margins in Grocery and Ingredients were impacted where sales price actions have lagged the effects of input cost inflation," said AB Foods.

In Retail, however, operating profit margin was ahead of expectations and is expected to be over 10% at the half-year. Inflationary pressures were broadly mitigated by a favourable dollar exchange rate and a reduction in store operating costs and overheads.

AB Foods added that supply chain pressures have alleviated somewhat.

Laura Hoy, equity analyst at Hargreaves Lansdown, said: "Primark-owner ABF's diversified business offered a safety net throughout the pandemic, but as things normalise all eyes are on retail for signs of a comeback. Compared to last year, when store closures kept sales painfully low, revenue rose considerably. But sales at Primark have yet to make their way to pre-pandemic levels.

"There are a few reasons for this - chief among them being the resurgence in covid cases which kept many shoppers at home at the end of last year. Primark doesn't have much of a website, so it was at a disadvantage to peers who offered delivery and in-store collection. However, a new website is due to hit the UK in March which will give customers the ability to check item availability, but stops short of offering a full e-commerce experience."

ITV lost 2.4% after Goldman Sachs resumed coverage on the broadcaster at Sell.

GlaxoSmithKline fell 1.8% after consumer goods firm Unilever late Wednesday said it will not lift its bid for GSK's consumer unit above the current GBP50 billion offer.

Unilever said it has seen a set of financial assumptions on the GSK Consumer Healthcare business, outlined by current owner GSK. Unilever said the numbers do not "change our view on fundamental value". Shares in the Dove soap maker closed down 0.5%.

In the FTSE 250, Spirent Communications ended the best performer, up 9.0%, after the telecommunications company saw a strong performance in the final quarter of 2021 despite ongoing supply chain challenges.

Spirent said that annual revenue had grown 10% to USD576 million, driven by strong order intake growth through to its year end. In 2020, it reported revenue of GBP539.4 million.

The Sussex, England-based firm said it now expects to deliver an adjusted operating profit that is "slightly" ahead of the market consensus which it placed as USD116 million. Last year the company reported an adjusted operating profit of GBP522.4 million.

Elsewhere in London, Deliveroo closed up 1.4% on a strong end to the food delivery firm's 2021. The Will Shu-led firm said fourth quarter gross transaction value jumped 33% annually to GBP1.73 billion from GBP1.31 billion.

Anglo-Dutch rival Just Eat Takeaway.com gained 3.4% in a positive read-across.

The dollar was lower across the board. The pound was quoted at USD1.3657 at the London equities close, up from USD1.3630 at the same time on Wednesday.

The euro stood at USD1.1350 at the European equities close, up from USD1.1345 late Wednesday. Against the Japanese yen, the dollar was trading at JPY114.00, down from JPY114.25.

On the economic front, the growth rate of consumer prices in the euro area in December continued to accelerate, data from Eurostat showed.

The eurozone annual inflation rate was 5.0% in December, up from 4.9% in November. In the same month a year before, consumer prices dropped 0.3%.

The highest contribution came from energy with 2.46 percentage points, as Europe's ongoing energy shortage continues to drive up prices. On a monthly basis, the inflation rate for the eurozone was 0.4%.

Stocks in New York were rebounding at the London equities close after ending firmly in the red on Wednesday, which saw the tech-heavy Nasdaq Composite fall into correction territory.

The DJIA was up 1.2%, the S&P 500 index up 1.4% and the Nasdaq Composite up 2.0%.

On Wall Street, Dow member Travelers Cos was up 5.3% as the insurer rounded off a strong 2021 with a record fourth quarter.

The New York-headquartered firm said total revenue in the three months to the end of December rose 7.3% to USD9.01 billion from USD8.40 billion a year earlier. Net written premiums alone were 10% higher at USD7.80 billion from USD7.37 billion.

Fourth quarter pretax profit inched up 1.7% to USD1.59 billion from USD1.57 billion. Travelers said its fourth quarter net income per diluted share rose 5.3% annually to a record of USD5.37 from USD5.10.

Brent oil was quoted at USD88.67 a barrel at the equities close, unmoved from USD88.68 at the close Wednesday. Oil majors BP, Royal Dutch Shell 'A' and 'B' closed down 1.3%, 1.7% and 1.7% respectively.

"We could be seeing an element of profit taking on the likes of Royal Dutch Shell and BP after a decent run of gains and a solid start to the year," said CMC Markets analyst Michael Hewson.

The economic events calendar on Friday has UK retail sales figures at 0700 GMT.

The UK corporate calendar on Friday has trading statements from promotional merchandise marketer 4imprint Group and merchant bank Close Brothers.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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