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(Alliance News) - The FTSE 100 opened lower on Thursday, with Pearson and Whitbread the worst performers, amid a muted reaction to the long-awaited signing of the US-China 'phase one' trade deal.
The FTSE 100 index was down 14.54 points, or 0.2%, at 7,628.26 early Thursday. The mid-cap FTSE 250 index was up 15.20 points, or 0.1%, at 21,728.31. The AIM All-Share index was down 0.1% at 970.21.
The Cboe UK 100 index was down 0.1% at 12,927.66. The Cboe 250 was flat at 19,627.21, and the Cboe Small Companies down 0.5% at 12,441.78.
In mainland Europe, the CAC 40 in Paris was up 0.1%, while the DAX 30 in Frankfurt was 0.3% higher early Thursday.
"For the market, the signing of the phase 1 deal yesterday was merely a formality, and so the reaction was minimal. Instead we might now see disenchantment taking hold," said Commerzbank.
The bank continued: "The all-decisive question is how long the calm will last. Our experts assume that tensions are going to rise again as part of the phase 2 negotiations so that renewed escalation becomes more likely. So what matters is when the US and China will start their next round of negotiations in seriousness."
"One way or the other: as the market participants are aware of the fact that the conflict has not been finally solved the potential of a risk-on rally is likely to remain limited anyway."
Markets in Asia were mixed on Thursday. In Tokyo, the Nikkei 225 index closed up 0.1%. The Shanghai Composite ended down 0.5%, while the Hang Seng index in Hong Kong finished 0.2% higher.
At the top of the FTSE 100 was Associated British Foods, up 2.9% after reporting revenue growth across its portfolio.
Group sales for the 16 weeks to January 4 were up 4% year-on-year at constant currency, and 3% ahead at actual rates.
Sales at low-cost fashion chain Primark were up 4.5% year-on-year at constant currency and 3.0% ahead at actual exchange rates. This was, however, "almost entirely" driven by an increase in selling space. The like-for-like performance improved, AB Foods said without specifying numbers, driven by a marked upturn in the eurozone.
In the UK, Primark sales were up 4.0%, driven by new selling space offset by a "marginal" decline in like-for-like sales. Sales in the eurozone were up 5.1% with the improvement in like-for-like sales seen in the final quarter of the previous financial year continuing. The US also delivered like-for-like sales growth.
Elsewhere in the AB Foods portfolio, Sugar revenue was up 7% at constant currency and Grocery sales flat, while Agriculture revenue was 10% ahead of a year ago and Ingredients sales up 3%.
Firmly at the bottom of the blue-chips was Pearson, off 13% as the educational publisher met guidance in 2019 though predicted challenging trends in US Higher Education Courseware to continue.
The educational publisher said underlying revenue was flat in 2019 and adjusted operating profit GBP590 million.
US Higher Education Courseware revenue declined by 12%, though there was "modest" growth in digital revenue. Pearson said it expects the trends seen in the unit to continue, with heavy declines in print partially offset by modest growth in digital.
For 2020, Pearson expects to deliver adjusted operating profit between GBP500 million to GBP580 million, including the 25% stake in Penguin Random House that it recently agreed to sell for USD675 million.
"We have secured flat revenue this year and delivered operating profit within the guidance range, with much weaker sales in US Higher Education Courseware offset by a strong performance in the broader 76% of Pearson," said Chief Executive John Fallon.
Whitbread shed 6.6% as it issued a cautious outlook for the 2021 financial year.
Total UK sales in the third quarter were up 0.3%, though fell 1.3% on a like-for-like basis. UK & International total sales growth was 1.0%.
"Our performance in the quarter reflects a good F&B performance and marginally declining total accommodation sales. Weak business and leisure confidence in the regions continued, which was partially offset by the strength of the central London market, where we outperformed," said Chief Executive Alison Brittain.
The start of the fourth quarter has seen more positive regional UK data due to lower comparators and the timing of Christmas, the company continued, along with the continuation of the strong London market. However, "it is still early" in the fourth quarter and "a level of caution" remains on the UK hotel environment, Whitbread added.
Looking into the 2021 financial year, the company noted that the UK backdrop remains "uncertain" and sustained industry inflation continues. Whitbread said it will take a cautious approach to hotel demand and expects a net margin headwind of around GBP60 million, comprising wage inflation and ongoing investment, partially offset by its efficient programme.
In the FTSE 250, Hays was down 6.7% as it guided to a fall in interim profit.
Hays said it expects operating profit for the first half of around GBP100 million, which would be down from GBP124.1 million a year ago.
Group net fees for the second quarter, which ended December 31, fell by 7% on a headline basis and 4% like-for-like. Like-for-like net fees in its Temp and Perm businesses declined by 3% and 6% respectively.
In Australia & New Zealand, net fees were down 7% like-for-like and Germany down 9%, while the UK & Ireland fell 4%.
"Growth slowed markedly in December, driven by specific events in key markets: general strikes in France, tragic Australian bushfires and the UK election," said Chief Executive Alistair Cox.
"Each event impacted markets already facing challenging economic conditions and low business confidence. Germany weakened further, with economic uncertainties driving increased client cost controls," he said. "The Americas performed well, with the USA a standout, while Asia was flat. Conditions in the UK remained uncertain, particularly before the election, although the result may provide impetus over time."
"The rebound from these events and our New Year 'return to work' are thus particularly important, and we are closely monitoring activity levels. Overall, we expect near-term macro conditions to remain difficult, but see continued opportunities for growth in key specialisms like IT," Cox added.
John Wood Group surged 10% as the oilfield services firm said its full-year results will demonstrate underlying earnings growth and margin improvement, driven by "robust" activity and cost synergies.
Adjusted earnings before interest, tax, depreciation and amortisation for 2019 is expected between USD850 million to USD860 million, with like-for-like adjusted Ebitda up 6%. Revenue is expected around USD10 billion, in line with 2019.
For 2020, John Wood sees "modest" revenue growth and and its margin improvement strategy yielding an increase in adjusted Ebitda.
To come on Thursday are fourth quarter earnings from US bank Morgan Stanley.
The economic events calendar on Thursday has Irish inflation at 1100 GMT and US retail sales figures at 1330 GMT. Accounts from the European Central Bank's last monetary policy meeting of 2019 will be released at 1230 GMT.
"Today’s US retail sales report for December is expected to show a pickup in activity after disappointingly slow growth in November. Reports from the high street suggest that Black Friday sales and spending through the Christmas period was strong," said Lloyds Bank.
The euro was quoted at USD1.1151 early Thursday, soft from USD1.1159 late Wednesday. Against the yen, the dollar was quoted at JPY109.97 versus JPY109.94.
Sterling was quoted at USD1.3033 early Thursday, firm on USD1.3024 at the London equities close on Wednesday.
Gold was quoted at USD1,554.07 early Thursday, up from USD1,549.30 late Wednesday. Brent was quoted at USD64.21 early Thursday, up from USD63.70.
By Lucy Heming; lucyheming@alliancenews.com
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