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Alliance News


LONDON MARKET MIDDAY: FTSE 100 Plummets But Gold Gains On Volatility

Thu, 11th Oct 2018 13:02


LONDON (Alliance News) - The FTSE 100 nosedived on Thursday to join European peers in a sea of red, following sharp falls in the US and Asia overnight.

"Turning to this afternoon and the Dow Jones is set to join the its peers in the casualty room, with the futures pointing to a 350 point drop, one that would take it the wrong side of 25300 for the first time in almost 2 months. However, what the Dow actually does when the bell rings on Wall Street could end up being drastically different, dependent on what happens with the US inflation reading," said Spreadex analyst Connor Campbell.

With strong data from the US fueling fears over rising interest rates - the US Federal Reserve having hiked rates three times so far this year - focus will be on the inflation reading at 1330 BST.

The FTSE 100 was down 1.9%, shedding 132.86 points to remain just above the 7,000 mark, at 7,012.88. The blue-chip index is currently trading around its worst levels in six months.

The FTSE 250 was down 2.0% at midday, losing a steep 390.59 points, to 18,848.57 while the AIM All-Share sank 3.1% at 963.55.

The Cboe UK 100 lost 2.0% at 11,903.74, while the Cboe UK 250 was 2.2% lower at 17,102.21 and the Cboe UK Small Companies was shed 0.6% to 11,721.57.

Among few risers on Thursday were gold miners, tracking the higher price of the precious metal.

In the FTSE 100, Fresnillo was up 4.0% and Randgold Resources gaining 3.3%. In the FTSE 250, Centamin climbed 6.3% and Hochschild Mining 3.5%.

Gold was quoted at USD1,202.87 an ounce at midday, rising from USD1,188.56 late Wednesday as the safe haven asset benefitted from the market volatility.

Outside of gold miners, there were broad-based losses in London on Thursday.

Leading the fallers in the FTSE 100 was Barratt Developments, shedding 10% as the stock went ex-dividend - meaning new buyers no longer qualify for the latest payouts - and as the Royal Institution of Chartered Surveyors showed Brexit worries weighed on new buyer demand for houses in September.

RICS said headline enquiries slipped in September, with the net balance coming in at minus 11%, compared to minus 9% in August.

"There are a number of themes running through the comments of respondents this month but uncertainty relating to Brexit negotiations is at the very top of the list followed by references to the confidential remarks made by the Bank of England Governor to the cabinet," said RICS chief economist Simon Rubinsohn.

Last month, BoE Governor Mark Carney warned Cabinet that the outcome of a no-deal Brexit could see house prices fall up to 35% and unemployment surge.

Hargreaves Lansdown tumbled 6.5% after the fund supermarket posted first quarter net inflows of GBP1.3 billion, down 16% on the GBP1.54 billion achieved in the same period a year ago.

Hargreaves grew assets under administration by 2.7% to GBP94.1 billion over the three months to September 30, from GBP91.6 billion at June 30.

Comfortably the worst performer in the FTSE 250 was Keller Group, diving 29% as it reported "deteriorating southeast Asian market conditions".

The geotechnical specialist expects its Asia-Pacific division to post a pretax loss between GBP12 million to GBP15 million for 2018, having previously forecast the division to post a "small" profit.

The FTSE 250-listed company said it is undertaking a strategic review of its southeast Asian and Waterway businesses, due to recent changes in management, and will update the market in "due course" on the outcome.

WH Smith was also firmly in the red, down 13% after the books and stationery retailer posted a fall in annual profit on restructuring costs.

For the year to August 31, the retailer posted pretax profit down 4% to GBP134 million from GBP140 million, after incurring a GBP11 million charge on restructuring and store closure costs.

Meanwhile, revenue increased to GBP1.26 billion from GBP1.23 billion a year prior, lifted by WH Smith's more healthy Travel business, which operates outlets in airports and other travel hubs.

Elsewhere on the Main Market, N Brown shares slumped 22% after slashing its interim dividend.

N Brown proposed an interim dividend of 2.83p per share, down 50% from 5.67p a year before, as exceptional items "have meant that distributions have not been covered by free cash flow".

For the six months to September 1, N Brown's pretax loss narrowed slightly to GBP27.1 million compared to GBP27.6 million. Meanwhile, revenue increased 1.0% to GBP457.8 million from GBP453.4 million.

There was a similar mass of red in mainland Europe on Thursday, with the CAC 40 in Paris and DAX 30 in Frankfurt down 1.6% and 1.4% respectively.

Also set to extend Wednesday's sharp losses are stocks in the US, with Wall Street is pointed towards a lower open. The Dow Jones is called down 0.9% - having shed 3.2% on Wednesday - while the S&P 500 is called down 0.8% and the Nasdaq down 0.7%.

In the economic events calendar, US CPI is at 1330 BST with initial and continuing jobless claims due at the same time.

"The strong US economic background that has supported share prices this year is now working against that same market. Rising interest rates are fuelling concerns that higher borrowing costs will erode the margins of US companies and with the domestic labour market at its strongest in nearly 50 years, wage pressures are filtering into companies' costs," explained Fiona Cincotta, senior market analyst at City Index.

US CPI is expected to ease to an annual rate of 2.4% in September from 2.7% in August. A higher reading could further heighten interest rate worries, and accelerate Thursday's sell-off.

In Europe, accounts from the European Central Bank's last monetary policy meeting are released at 1230 BST.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2018 Alliance News Limited. All Rights Reserved.

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