LONDON (Alliance News) - London stocks were dragged in competing directions by a slew of corporate news from blue-chip companies on Thursday, closing broadly flat as the risers and fallers wiped each other out, and the UK services sector saw its pace of growth slump.
UK services sector activity expanded at the slowest pace since February 2013 in April, according to data from Markit. The Chartered Institute of Procurement & Supply/Markit services Purchasing Managers' Index fell to 52.3 in April from 53.7 in March, while economists had expected a score of 53.5.
This followed on from PMI reports showing a surprise contraction in UK manufacturing activity in April, the first shrinking seen since March 2013, and as construction activity slowed to its lowest level since mid-2013.
The pound was broadly flat against the dollar at the London close, at USD1.4487 compared to USD1.4476 at Wednesday's close. The euro was down against the dollar, closing at USD1.1406 against USD1.1475 at the close on Wednesday.
Fawad Razaqzada, an analyst at City Index, said the sluggish PMI reports this week delivered a "hat-trick" of bad news for sterling, echoing earlier comments from IG analyst Joshua Mahony who said the PMI surveys provide the "clearest indication yet that UK growth is moving in the wrong direction in the second quarter".
Razaqzada added that chief among the concerns hampering economic activity is uncertainty in the lead-up to the UK's referendum on its place in the European Union.
"Against this backdrop of uncertainty, sentiment is likely to remain cagey until at least the EU-UK vote is out of the way on June 23. The potential for a lack of significant business spending in the meantime because of this 'Brexit' risk could hurt UK growth, potentially causing the second-quarter GDP to contract. Consequently, the pound is likely to trade inside large ranges," Razaqzada said.
On Friday, all eyes will be on the US Nonfarm Payrolls report, due at 1330 BST. A key barometer of the US economy's health, the report is watched closely by the US Federal Reserve when deciding its monetary policy stance.
Razaqzada said the dollar got a boost from some rare positive jobs data in the US this week, but the next big move for the US currency will depend on the outcome of the nonfarm payrolls report.
He said leading indicators ahead of the report have been mixed, "so it is anyone's guess what the actual headline NFP number will be". Christopher Vecchio, currency analyst with DailyFX, said investment bank estimates have been skewed higher ahead of the report, ranging as high as 250,000. According to FXStreet, current consensus is for 200,000 jobs added in April, against 200,000 in March.
On Wall Street at the London close, the Dow Jones Industrial Average, the S&P 500, and the NASDAQ Composite were all up 0.3%. In Paris, the CAC 40 closed down 0.1% and the DAX 30 closed up 0.2% in Frankfurt.
For London on Thursday, however, trading was dominated by a cavalcade of activity from blue-chip and mid-cap companies in London. The FTSE 100 closed up 0.1%, or 5.23 points, at 6,117.25 and the FTSE 250 closed up 2.26 points at 16,661.70.
In the FTSE 100, British Gas-owner Centrica was the biggest loser on the day, down 10% after it unveiled plans to raise funds to cover two acquisitions and cut its debt pile, shoring up its financial position. The group will issue 350.0 million shares, around 7.0% of its current issued share capital. At its closing price on Wednesday, the transaction would raise around GBP808.5 million.
Centrica was followed lower by satellite communications group Inmarsat, down 7.0%, after it revised down its 2016 revenue guidance and amended its cooperation agreement with Ligado Networks in the US. Inmarsat's first-quarter pretax profit declined 39% and it said the underlying trading environment remains tough, with demand weakening in the first quarter.
Engine maker Rolls-Royce Holdings was also among the biggest fallers, down 2.6%, as it said market conditions remained difficult in the first months of 2016 and that profit for the full year will be heavily-weighted to the second half. The group, hit by a series of profit warnings in 2015, also said it was on track with its massive restructuring programme, designed to simplify the business and bring more accountability to decision-making.
The FTSE 100 risers were led by telecommunications giant BT Group, which closed up 2.7%. BT posted higher annual pretax profit, covering the year to the end of March, outlined guidance for the next two years and tabled plans to invest around GBP6.0 billion on broadband and 4G coverage in the UK over the next three years.
RSA Insurance Group, the general insurer, rose 2.1% as it posted good underwriting results for the first quarter of 2015, pushing operating profit up beyond its expectations. RSA said it benefited from benign weather conditions in the quarter and said its underlying results continue to point to an improving picture in its key markets.
Also gaining was Wm Morrison Supermarkets, up 2.1%, after it reported like-for-like sales growth in the 13 weeks to May 1, its second consecutive quarter of like-for-like sales growth. Excluding fuel, like-for-like sales grew 0.1% in the first quarter, helped by a strong performance in its 'food-to-go' range. Total sales still fell in the quarter, down 1.8%, as the group continues to battle against a competitive grocery market.
The FTSE 250 had its fair share of movers on Thursday too. Bakery chain Greggs was up 4.4% after being initiated with a Buy rating by broker Investec. Analyst Alistair Davies said upside risk remains from Greggs' concerted push into the food-to-go market, with the possibility of further capital returns should the group successfully execute on its strategy.
Insurer esure Group, up 4.3%, was helped higher by gross written premiums growing 16% to GBP151.0 million in the first quarter of 2016, while in-force policies rose 1.7% to 2.0 million. Income from its GoCompare.com price comparison service grew 19% and the group said its financial position remains strong, leaving it on track to meet 2016 guidance.
Among the fallers, specialist lender Shawbrook Group closed down 4.2%, despite pretax profit growing to GBP19.6 million from GBP13.7 million in the first quarter, driven by increased origination and continued operational leverage. Analysts said the profit had slightly missed expectations and blamed this on the group's net interest margin, which came in below consensus in part to a bias in its mix to property loans.
The AIM All-Share closed down 0.2% at 722.39 points.
7digital Group, the business-to-business digital music and radio services company, rose 20% after striking a deal with musical.ly, a video and music content-focused social media platform. The company also said its client i.am+, the technology company founded by musician and producer Will.i.am, is now taking pre-orders for its Dial wearable 'smartcuff' devices, ahead of its launch on May 13.
Filtronic, which makes microwave electronics products for the wireless telecommunications infrastructure market, also got a boost from new contracts as it reported a USD24.2 million order from an unnamed European manufacturer for its new integrated antenna products. Filtronic closed up 21%.
Cyber security company Falanx Group closed the biggest faller in the AIM All-Share, down 31% after it struck a deal to acquire cyber security services firm Advanced Security Consulting and said it would raise money through a placing and a convertible note issue.
Gold closed lower on Friday, at USD1,276.39 per ounce against USD1,280.54 at the close on Wednesday, while Brent oil closed up at USD45.72 per barrel, up from USD44.81 a barrel at Wednesday's close and continuing its steady recovery.
Friday's economic calendar in the UK is expected to include Halifax House Prices data. Across the pond, beyond the US Nonfarm Payrolls, the US Unemployment Rate and Average Hourly Earnings reports are also due at 1330 BST.
In the corporate calendar Friday, trading statements will be published by hotels operator InterContinental Hotels Group, aviation services company BBA Aviation, motor insurer Hastings Group Holdings and property developer Capital & Counties Properties. Irish corrugated packaging company Smurfit Kappa Group publishes first quarter results, while investment bank Numis Corp posts interim results.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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25 Sep 2014 12:09