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LONDON (Alliance News) - UK stocks ended lower Thursday, although recovered from earlier declines, after news that the Chinese regulator suspended its recently implemented circuit-breaker system used to prevent further losses in the country's stock market.

The FTSE 100 index ended down 2.0% at 5,954.08 points, the FTSE 250 down 1.6% at 16,792.22, and the AIM All-Share down 1.1% at 726.08. In Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt closed down 1.7% and 2.3%, respectively.

At the London close, US stocks were also recovering after a negative open, but still in the red, with the Dow 30 down 1.0%, the S&P 500 down 1.1%, and the Nasdaq Composite down 1.5%.

"It seems that investors, for now at least, are taking the news as a positive, the move ostensibly preventing the panic-pause-more panic pattern that appeared in the Chinese markets on Monday and Thursday from repeating itself," said Spreadex analyst Connor Campbell.

"That's the theory, at least; we'll just have to see how it works in practice tomorrow morning, as whilst the exacerbating nature of the circuit breaker rule may have been removed, the fear-inspiring issues currently scaring the bejesus out of investors remain unsolved," Campbell added.

Trading was halted for the day on the Shanghai and Shenzhen stock exchanges on Thursday after a heavy drop in prices triggered an automatic "circuit breaker". This was the second time the circuit breaker rule has been activated, with the first being on Monday when the rule was introduced.

The mechanism was proposed after volatility on Chinese stock exchanges sent jitters through global markets in the second half of last year. On Thursday, trading in Shanghai was halted after the Shanghai Composite had fallen 7.3%.

The declines came after China's central bank set a weaker reference rate for the yuan exchange rate. The People's Bank of China fixed Thursday's central parity rate of the yuan at 6.5646 per dollar, weaker than Wednesday's reference rate of 6.5314.

Elsewhere in Asia, the Nikkei 225 index in Tokyo ended down 2.3% and the Hang Seng in Hong Kong ended down 3.1%.

In London, miners and other stocks with links to China suffered the heaviest losses.

Shares in Anglo American ended at the bottom of the blue-chip index, down 11%. Meanwhile, BHP Billiton and Antofagasta closed down 5.5% and 5.3%, respectively. Fellow miner Randgold Resources, however, was among the few blue-chips in the green, up 1.7%, as spot gold continues its new year's rally.

At the London close, gold was quoted at USD1,103.80, having touched a high of USD1,107.50 earlier in the day. The yellow metal started 2016 at USD1,061.12.

Emerging markets-focused asset manager Aberdeen Asset Management dropped 7.4%. The stock also went ex-dividend, meaning new buyers no longer qualify for the latest dividend payout.

In the FTSE 250, China-focused investment fund Fidelity China Special Situations traded down 4.7%.

Dropping crude prices sent oil companies lower, with Royal Dutch Shell 'A' down 2.9%, BG Group down 2.7%, and BP down 1.7%.

Brent surpassed its Wednesday low of USD34.11 a barrel, to a make a new 11-year low of USD32.14 early Thursday, its lowest level since April 2004. At the London close, Brent was quoted at USD34.23. US benchmark West Texas Intermediate similarly fell to a multi-year low of USD32.08 a barrel, priced at USD33.81 at the close.

Elsewhere on the London Stock Exchange, shares in Marks & Spencer shifted between gains and losses to end up 0.2%. The retailer confirmed analyst fears of a weak Christmas trading season for UK clothing retailers, after it reported a worse-than-expected slump in general merchandise sales on Thursday, even as margins held firm, and as it revealed Chief Executive Marc Bolland will retire from his role this year.

The FTSE 100-listed retailer said Bolland, who has been at the helm for six years, will step down in April after the close of the group's current financial year. He will be replaced by Steve Rowe, the executive director of the company's general merchandise business, covering its clothing and homewares.

Investec analyst Kate Calvert said Rowe has significant experience across the whole business having also run the food division and store operations, and his appointment is likely to be well received.

The news came as M&S said group sales in the 13 weeks to December 26 fell 0.4% year-on-year, remaining flat at a constant currency basis, as food sales rose 3.7% but general merchandise dropped 5.0%. On a like-for-like basis, food grew 0.4% and general merchandise declined 5.8%.

Poundland Group ended as the worst midcap performer, down 11% to 171.68 pence, after it added to the picture of woe for the UK retail sector over the key Christmas sales period with a profit warning.

As a result of sluggish holiday trading, Poundland said it expects its pretax profit for the year to March 27 to be at the lower end of market expectations, as some of the weak trading it had seen in the first half of its current financial year continued into the third quarter.

The single-price retailer said total sales in the third quarter, covering the 13 weeks to December 27, rose 29%, with revenue growth coming from its current Poundland stores but with the majority of this remarkable gain attributable to the 99p Stores outlets added to its estate following the acquisition of its rival last year.

Investec cut its price target on the retailer to 200 pence from 225p, saying that the company's update was "disappointing and likely to not just be attributable to the weather". Investec and Shore Capital cut their profit estimates for financial 2016 following Poundland's update.

In the economic calendar, the US Labor Department released a report showing that initial jobless claims pulled back by less than expected in the week ended January 1. The report said initial jobless claims fell to 277,000, a decrease of 10,000 from the previous week's level of 287,000. Economists had expected jobless claims to drop to 272,000.

Meanwhile, continuing claims climbed by 25,000 to 2.230 million in the week ended December 25, while economist expectations were at 2.193 million.

Before that, there was a flurry of data from the eurozone. Retail sales declined 0.3% month-on-month in November, following a 0.2% fall in October, revised from a 0.1% drop. Economists had forecast a 0.2% increase. On a yearly basis, retail sales increased 1.4% in November, after a 2.5% growth in October, while economists expected a 2.0% rise.

The euro area economic confidence and business sentiment strengthened in December, survey results from the European Commission showed. The economic sentiment index rose to 106.8 in December from 106.1 in November. It was forecast to fall marginally to 106.

Eurozone's jobless rate fell for a third straight month in November to its lowest level in more than four years, according to figures from Eurostat.

The seasonally adjusted unemployment rate dropped to 10.5% in November, which was the lowest level since October 2011. October's jobless rate was revised down to 10.6% from 10.7% reported originally. Economists had expected the figure to remain steady at 10.7%.

At the London close, the euro was priced at USD1.0845, while the pound was quoted at USD1.4563.

In the economic calendar Friday, German industrial production and current account data are due at 0700 GMT. France's exports and imports data are expected at 0745 GMT. UK's goods trade balance is due at 0930 GMT. In the US, nonfarm payrolls are due at 1330 GMT, and wholesale inventories are due at 1500 GMT.

In the corporate calendar Nichols, Spire Healthcare Group and XP Power release trading statements.

By Daniel Ruiz; danielruiz@alliancenews.com

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