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(Alliance News) - The FTSE 100 tumbled nearly 80 points on Thursday with sentiment subdued as traders await a US stimulus deal and the blue-chip index weighed down by Glencore.
The FTSE 100 index closed down 77.78 points, or 1.3%, at 6,026.94. The FTSE 250 ended down 158.92 points, or 0.9%, at 17,479.38, but the AIM All-Share closed up 6.16 points, or 0.7%, at 917.30.
The Cboe UK 100 ended down 1.1% at 600.88, the Cboe UK 250 closed down 0.7% at 14,871.41, while the Cboe Small Companies ended up 0.1% at 9,214.07.
"Spooked by the Bank of England, cable's 6-month highs, and a sector-dragging update from Glencore...the FTSE had a rough one on Thursday," said Connor Campbell at Spreadex.
The pound was quoted at USD1.3137 at the London equities close Thursday, compared to USD1.3144 at the close on Wednesday. Sterling hit a five-month high of USD1.3186 earlier on Thursday, though gave back some ground as the session progressed.
The Bank of England on Thursday offered a more optimistic outlook for the UK's economic prospects than a few months ago, as it kept monetary policy unchanged.
The BoE said policymakers unanimously voted to keep the Bank Rate unchanged in light of the challenges posed by the coronavirus pandemic. The BoE's nine-member Monetary Policy Committee all voted to keep the UK's key interest rate at 0.1% and asset purchases at GBP745 billion, as widely expected.
The central bank improved its "indicative projection" for growth for the UK economy, forecasting that gross domestic product will shrink by 9.5% in 2020, following UK government measures to protect the economy. In May, the central bank had warned that economic growth could slump by 14% this year.
IG senior market analyst Joshua Mahony said: "Better-than-expected economic forecasts and a perception that the slowdown wasn't as bad as first expected have helped lift sentiment around the pound. Unfortunately, Bailey made sure to remind the markets that forecasts hold little value, with the governor seeing an 'awful lot of risk' to the downside given the potential for further outbreaks and lockdowns."
Outside of London, European stocks also lacked enthusiasm as traders await agreement on a fresh US stimulus package.
The White House has set a Friday deadline to reach a deal with Congress on the next phase of the US economic stimulus, and threatening to otherwise take unclear executive action.
"By Friday, if we haven't made significant progress and we are much too far apart, the president is prepared to take executive action," Chief of Staff Mark Meadows said in an interview on CNN.
Legally, President Donald Trump is constrained from acting unilaterally on stimulus measures without funds from Congress. Meadows blamed Democrats for not compromising on their USD3 trillion proposal, but did say Republicans are starting to make concessions.
In European equities on Thursday, the CAC 40 in Paris ended down 1.0%, while the DAX 30 in Frankfurt ended down 0.5%.
Wall Street was flat at the London equities close as trepidation over US stimulus was offset somewhat by a better-than-expected initial jobless claims number.
US initial jobless claims eased to 1.2 million for the week ended August 1, compared to 1.4 million in the prior week. The figure beat market forecasts, cited by FXStreet, for 1.4 million applications. Continuing claims, or workers who have collected benefits for two straight weeks, dropped by 844,000 to 16.1 million.
The figures are a prelude the closely-watched US jobs report for July on Friday. Economists expect nonfarm payrolls to have increased by 1.6 million jobs in July after adding a record 4.8 million in June.
Stocks in New York were broadly flat at the London equities close, with the DJIA unchanged, the S&P 500 index down 0.2%, and the Nasdaq Composite down 0.1%.
The euro stood at USD1.1845 at the European equities close Thursday, down against USD1.1901 at the same time on Wednesday. Against the yen, the dollar was trading at JPY105.51 compared to JPY105.47 late Wednesday.
Back in London, Glencore shares ended down 8.1% after the miner posted a loss for the first half of the year and opted against a dividend.
Glencore said that for the six months ended June 30, it swung to a net loss of USD2.60 billion from a USD226 million profit last year, as revenue fell to USD70.96 billion from USD107.43 billion. Adjusted earnings before interest, tax, depreciation and amortisation dropped 13% to USD4.83 billion but was ahead of market expectations of USD4.29 billion.
The company booked impairments of GBP3.2 billion as a result of lower commodity prices related to the uncertainty arising from the coronavirus pandemic.
Glencore said it will not pay its deferred dividend, saying the economic outlook is too uncertain due to the coronavirus. The dividend was put on hold earlier this year due to the pandemic. It stated that it would instead focus on reducing its net debt to less than USD16 billion by the end of 2020.
Brent oil was soft, quoted at USD45.37 a barrel at the London equities close Thursday from USD45.96 late Wednesday.
Gold was quoted at USD2,052.10 an ounce at the London equities close Thursday, up against USD2,046.16 at the close on Wednesday.
Among the blue-chip gainers was Aviva, closing up 4.6% after reporting a "solid" financial performance in the first-half and resuming dividend payments.
The insurer said it will pay a second interim dividend of 6.0 pence per share and has decided to review its longer-term dividend policy "in light of our strategic priorities and the future shape of the group".
The blue-chip firm added it may be exiting international markets, choosing to focus on its strongest markets - namely the UK, Ireland and Canada.
Pretax profit for the six months to June 30 slumped 61% to GBP804 million from GBP2.05 billion a year prior and operating profit was GBP1.23 billion, down from GBP1.39 billion in the same period.
Elsewhere in the FTSE 100, ITV closed up 3.9% despite saying its two main sources of revenue were hit, and economic uncertainty has halted dividend payments.
The UK television broadcaster and programme maker's advertising revenue fell 21% to GBP671 million, as the production division - ITV Studios - saw a 17% drop in revenue to GBP630 million.
Pretax profit for the six months ended June 30 slumped 93% to just GBP15 million from GBP222 million recorded a year ago. Interim revenue fell by 17% to GBP1.45 billion year-on-year from GBP1.75 billion.
In the FTSE 250, Hammerson tumbled 15% as the shopping centre owner announced a series of transactions to recapitalise the business and reduce leverage by a quarter after its loss widened in the first half of 2020.
The firm proposed a rights issue to raise gross proceeds of GBP552 million and the sale of substantially all of its 50% interest in VIA Outlets to a mutual fund managed by APG Asset Management NV for estimated cash proceeds of EUR301 million.
In conjunction with the rights issue, Hammerson said it will implement a capital reorganisation, comprising a sub-division and share consolidation to reduce the nominal value of its existing shares. This should result in a higher market price for the consolidated shares and, accordingly, a more appropriate issue price in the rights issue.
Hammerson explained that it is "pro-actively" taking measures to deal with the "substantial" impact on its business, driven by major structural changes to the retail industry, which have been exacerbated by the effects of Covid-19.
WH Smith shares shed 8.5%. The company said Covid-19 has continued to have a significant impact on trading, so much so that the books and stationery retailer is proposing a restructuring of operations that could lead to up to 1,500 job cuts.
WH Smith said that due to the impact of the pandemic on passenger numbers and lower footfall on the UK high street, it will review its store operations for both its Travel and High Street businesses.
In addition, following the impact of Covid-19, WH Smith expects to report a headline pretax loss for the year ending August 31 of between GBP70 million and GBP75 million, compared to a profit of GBP155 million in financial 2019.
WH Smith did note its situation has started to improve since April, with revenue for the month of July down by 57% year-on-year, compared to an 83% fall in April. However, sales have continued to be materially lower compared to the prior year.
In the corporate calendar on Friday are half-year results from Standard Life Aberdeen, Rightmove and Hikma Pharmaceuticals, with annual results from fund supermarkets Hargreaves Lansdown.
Friday's economic calendar has China trade data at 0300 BST and German industrial production at 0700 BST. The main event is US nonfarm payrolls, due at 1330 BST alongside the unemployment rate and average hourly earnings.
By Lucy Heming; lucyheming@alliancenews.com; with help from Neetika Kurup; neetikakurup@alliancenews.com
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