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LONDON (Alliance News) - Shares opened lower in London Thursday, with blue-chip stocks under-performing their smaller counterparts, as oil prices remained weak and ahead of an interest rate decision by the Bank of England.
Retailers provided the bulk of early UK company news, with the likes of Tesco and Burberry providing Christmas sales updates, together with Primark-owner AB Foods and Argos-owner Home Retail Group.
Tesco provided a pleasant surprise by reporting its first like-for-like sales increase in over four years, lifting the stock 6.4%. Burberry also reported improved sales, and its shares were just behind, up 4.4%.
Merlin Entertainments was the biggest early loser in the FTSE 100, down 5.3%, after being downgraded by JPMorgan.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 1.3% at 5,881.26
FTSE 250: down 0.6% at 16,601.04
AIM ALL-SHARE: down 0.2% at 717.41
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Hang Seng: closed down 0.6% at 19,817.41
Nikkei 225: closed down 2.7% at 17,240.95
DJIA: closed down 2.2% at 16,151.41
S&P 500: closed down 2.5% at 1,890.28
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GBP: soft at USD1.4407 (USD1.4415)
EUR: firm at USD1.0860 (USD1.0824)
GOLD: firm at USD1,089.37 per ounce (USD1,088.10)
OIL (Brent): soft at USD30.36 a barrel (USD30.62)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's Key Economic Events still to come
(all times in GMT)
09:00 Germany Real GDP Growth
09:00 Italy Industrial Output
11:00 Ireland Consumer Price Index
12:00 UK BoE Monetary Policy Committee Decision and Vote
12:30 EU ECB Monetary Policy Meeting Accounts
13:30 US Initial and Continuing Jobless Claims
13:30 US Export and Import Price indices
13:30 US Fed St Louis President Bullard speech
13:30 Canada New Housing Price Index
15:30 US EIA Natural Gas Storage
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The US economy continued to expand at a modest pace despite problems in the energy and manufacturing sectors, according to the Federal Reserve's Beige Book. The Beige Book, a collection of anecdotal reports from the Fed's 12 district, revealed that consumers remained in a relatively upbeat mood amid low gas prices. Economic activity has expanded in nine of the districts since the previous Beige Book report.
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US President Barack Obama and Russian President Vladimir Putin discussed the Syrian conflict ahead of peace talks later this month, the White House said. In a telephone call on Wednesday, the leaders discussed "the urgent need to implement" a UN Security Council resolution agreed last month that provided a road map for the peace process, spokesman Josh Earnest said. They also talked about the need for "productive discussions" between the Syrian opposition and government and the importance of humanitarian aid reaching besieged communities.
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Germany's wholesale prices continued to fall in December but the pace of decline slowed further, Destatis reported. Wholesale prices decreased 1% year-on-year in December, slower than the 1.1% drop seen in November. Nonetheless, the index has been falling since July 2013.
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Core machine orders in Japan plummeted 14.4% on month in November, the Cabinet Office said - worth JPY773.8 billion. The headline figure missed forecasts for a decline of 7.3% following the 10.7% increase in October. On a yearly basis, core machine orders added just 1.2% - also well shy of forecasts for an increase of 6.3% and slowing from 10.3% in the previous month.
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Indonesian President Joko Widodo called for calm after attacks in the capital Jakarta killed at least four people. "We must not be afraid and be defeated by this terror act," Joko was quoted as saying by Kompas.com news website.
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Iran expects the 13-year-long dispute over its nuclear ambitions to finally come to an end this weekend, Deputy Foreign Minister Abbas Araghchi said. While Western diplomats did not discount the possibility that the implementation of the nuclear deal between Tehran and six world powers could start then, they told dpa that no day had yet been fixed. In Washington, Secretary of State John Kerry said implementation day, when sanctions relief will begin under the deal, would take place "very soon, likely within the next coming days somewhere."
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A car bomb blast outside a police building in south-eastern Turkey killed at least five people, a news report said, citing local officials. Civilians and police were among the dead, and 39 others were wounded in the explosion in the Cinar district of Diyarbakir province, Hurriyet daily newspaper reported, citing a statement from the provincial governor's office. Parts of Diyarbakir province have seen frequent clashes between government forces and Kurdish militants.
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The European Commission launched an investigation to check whether Polish constitutional court reforms breach fundamental EU values, under a previously unused mechanism aimed at preventing serious threats to the rule of law. The procedure allows the EU's executive to analyse the situation in a member state and draw up recommendations. In the case of non-compliance, Poland could ultimately face a suspension of voting rights in the EU, although few expect this to happen. Poland's new conservative government, which took office in November, has come under fire for a string of measures that critics say aim to strengthen its grip on the judiciary and the media.
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Argentina's Finance Ministry said the country will make an offer to US hedge funds later this month to end a legal standoff that has locked the country out of global credit markets for more than a decade, The Wall Street Journal reported. Plans to make the offer come after Argentina on Wednesday resumed talks in New York with a group of hedge funds that sued Argentina in US courts.
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BROKER RATING CHANGES
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TRADERS: CITIGROUP RAISES BHP BILLITON TO 'BUY' ('NEUTRAL')
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BERENBERG RAISES STANDARD CHARTERED TO 'BUY' ('HOLD') - TARGET 750 (950) PENCE
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TRADERS: MACQUARIE CUTS HSBC TO 'NEUTRAL' ('OUTPERFORM')
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JPMORGAN CUTS MERLIN TO 'UNDERWEIGHT' ('NEUTRAL') - TARGET 440 (450) PENCE
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COMPANIES - FTSE 100
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Tesco said group like-for-like sales in the third quarter of its financial year fell, but they rose over the key Christmas period to January 9, leaving the supermarket chain on track for full-year profit. The UK's largest retailer said group like-for-like sales in the 13 weeks ended November 28 fell 0.5% year-on-year as a 1.5% decline in the UK offset 2.9% growth internationally. However, over the Christmas period in the six weeks to January 9, group like-for-likes rose 2.1%, with 1.3% growth in the UK and 4.1% growth internationally. Together, covering the 19 week period to January 9, group like-for-like sales increased 0.4%, which Tesco said was its first reported increase in over four years.
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Luxury goods retailer Burberry Group said like-for-like sales were flat in the third quarter of its financial year, a better performance than in the second quarter, as mainland China, key market for the group, returned to growth. The British heritage brand said its retail revenue for the half was GBP603.0 million. Retail revenue was flat on a like-for-like basis, an improvement on the 4.0% decline seen in the second quarter. Total retail revenue was up 1.0% in constant currencies. The group saw an improvement in its Asia Pacific business. Though Hong Kong remained weak, mainland China returned to growth.
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Associated British Foods reported a fall in revenue in the 16 weeks to January 2 as it continued to be hit by unfavourable currency exchange rates, which it said will hit adjusted earnings for the full year. The group, which owns discount fashion retailer Primark as well as British Sugar, along with agriculture and consumer goods businesses, said group revenue in the 16-week period fell 2.0% year-on-year, though grew 3.0% in constant currencies. At Primark, sales rose 3.0%, somewhat hit by a drag from the weak euro. At constant currency, sales would have risen 7% year-on-year.
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Sports Direct International disclosed hedge fund manager Crispin Odey has raised his stake in the company to around 5.0%, coming after consistent falls in the company's share price and less than a week after it issued a warning on Christmas trading. In a stock exchange filing, Sports Direct said Odey Asset Management has increased its stake in the business to 5.0% from 1.4% previously.
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Distribution and outsourcing group Bunzl said Chief Executive Michael Roney will step down after its annual general meeting in April and will be replaced by Frank van Zanten. The FTSE 100-listed group said Roney will leave after the AGM, due to be held on April 20, having served as chief executive for more than a decade. Van Zanten moves from the role of managing director of Bunzl's Continental Europe business. He will join the board on February 1 and take over when Roney retires in April.
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COMPANIES - FTSE 250
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Home Retail Group said its pretax profit for the year to the end of February will be at the lower end of market expectations as it posted a mixed trading performance for its Argos catalogue retail business but a rise in like-for-like sales at Homebase, its DIY and garden centre retail arm that has been put up for sale. The company said its pretax profit for the year will be at the lower end of market expectations of GBP92.0 million to GBP118.0 million. This would be down from GBP132.1 million a year earlier. Home Retail said total sales for Argos in the 18 weeks to January 2 rose 0.9%, though like-for-like sales fell 2.2%, with the group's new digital concession locations the main contributor to the sales growth. For Homebase, Home Retail said total sales fell 4.0%, even as like-for-like sales grew 5.0%, as the restructuring of its store base, including the closure of underperforming stores and a focus on a smaller overall portfolio, paid dividends.
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Separately, Home Retail late Wednesday confirmed it is advanced talks for the potential sale of its Homebase business to Australia's Wesfarmers Ltd for a cash consideration of GBP340 million. Home Retail said that it had begun talks with Wesfarmers in September, and had received a firm offer letter in November from Wesfarmers. Wesfarmers has completed its due diligence, and the two companies are currently finalising the transaction documentation, Home Retail said, although it cautioned there can be no certainty any transaction will be agreed.
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Sports and outdoor clothing retailer JD Sports Fashion said trading remained good during the key Christmas period, with like-for-like sales rising, and upgraded its expectations for the year to the end of January again. JD Sports, which upgraded its full-year expectations twice last year thanks to strong trading, said like-for-like sales in its core estate, including in Europe, rose 11% in the five weeks to January 2. As a result, the group said its headline pretax profit, before exceptional items, for the currently financial year is anticipated to be higher than the GBP136.0 million markets currently expect.
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SuperGroup reported growth in revenue in the Christmas period as it continued with expansion plans and store roll-outs in Europe. The clothing retailer and owner of the Superdry brand, said retail revenue in the 11 weeks ended January 9 rose 15% year-on-year to GBP143.5 million from GBP125.2 million. In the 37 weeks to the same date, retail sales increased to GBP315.6 million from GBP256.8 million. SuperGroup said revenue in the Christmas period was boosted by its European store roll-out programme. It opened 11 net new stores in the period, of which four were in Germany.
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Bookmaker William Hill said its operating profit for 2015 was in line with market expectations and said it is well positioned to deliver growth in 2016. The group, which is contending with a wave of consolidation in the gambling industry in which it has yet to participate, said its operating profit for the full year will come in around GBP290.0 million, in line with market expectations. The group said its gross win margin in the fourth quarter, covering the 13 weeks to December 29, was broadly in line with its expectations, while its net revenue from its core online gaming markets, including the UK, Italy and Spain, rose 14% year-on-year.
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Building products distributor SIG said it recorded only marginal like-for-like sales growth in 2015 and that its reported revenue has taken a hit from the weak euro and a tough UK market. The FTSE 250-listed company said group sales for 2015 hit GBP2.57 billion, down 1.4% due to the group taking a hit in its European operations from the weak euro. In constant currencies, revenue rose 3.6%, though the majority of this was derived from acquisitions, with only 0.2% like-for-like, constant currency growth in sales. SIG also maintained its underlying pretax profit guidance for the year and said its gross margin should be broadly flat year-on-year.
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Booker Group reported growth in sales in the four months to January 1 as its newly-acquired Budgens and Londis convenience store chains were successfully integrated into the business, although like-for-like sales declined. The food wholesaler and convenience store operator said total sales in the 16 weeks to January 1 rose 11% year-on-year, while non-tobacco sales grew 12% and tobacco sales increased 7.4%. Like-for-like sales including the Makro wholesale chain declined 3.1%, while non-tobacco like-for-likes fell 1.3%, and tobacco like-for-likes decreased 6.9%.
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COMPANIES - LONDON MAIN MARKET AND AIM
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ASOS reported growth in revenue in the four months to the end of 2015 as sales rose both in the UK and internationally, boosted by price investments and record sales over 'cyber weekend'. The online fashion retailer said total group revenue in the four months ended December 31 grew 23% to GBP459.7 million from GBP374.7 million in the same period the year before, as total retail sales rose 22% to GBP446.9 million from GBP365.2 million. ASOS said it made record sales over the so-called cyber weekend in late November, while average order frequency, basket value, number of orders, and active customers grew over the period.
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COMPANIES - INTERNATIONAL
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Anheuser-Busch InBev said its Anheuser-Busch InBev Finance Inc subsidiary has completed the pricing of USD46.0 billion in bonds to help back the acquisition of Anglo-South African rival SABMiller. The issuance is expected to close on January 25. AB InBev said the majority of the funding will be used to back the SABMiller deal, which will consolidated the Budweiser brewer's position as the world's biggest beer company, with the remainder of the net proceeds to be used for general corporate purposes.
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Volkswagen and US environmental officials met briefly for the first time on Wednesday and parted agreeing to continue discussing ways to resolve the auto maker's emissions violations, according to reports. They gave no indication of progress following an hourlong meeting at Environmental Protection Agency offices in Washington. The face-to-face meeting, which was requested by Volkswagen, came a day after California regulators rejected the car maker's plan to fix nearly 500,000 diesel-powered vehicles that were rigged to cheat on emissions tests, calling it vague and inadequate. The EPA said it agreed with California's assessment.
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Goldman Sachs Group plans to cut up to 10% of its fixed-income traders and salespeople later this quarter, The Wall Street Journal reported citing people familiar with the matter. The firm ultimately may cut deeper in those operations than its yearly push to cull about 5% of staff to make way for new hires, or it could shrink the unit by refraining from replacing those who go, the Journal said.
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Boeing and the Society of Professional Engineering Employees in Aerospace or SPEEA announced a tentative agreement on a new six-year contract extension, following several weeks of discussions.
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Swiss luxury goods group Compagnie Financiere Richemont reported its third-quarter total sales increased 3% to EUR2.93 billion from last year's EUR2.84 billion. In constant exchange rates, sales declined 4% mainly reflecting weak trading in Europe, while trading in the Asia Pacific region continued to be challenging. Sales in Americas in constant currency dropped 3%, while in Japan, sales grew 9%. Retail sales grew 8%, while wholesale sales declined 3%.
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French speed-train maker Alstom reported increased sales for the third quarter, along with rise in orders. The company's outlook is unchanged. Sales increased 7% to EUR1.6 billion from EUR1.5 billion generated over the third quarter 2014/15. The company attributed the growth to deliveries of suburban and regional trains in France, regional trains in Germany and Italy, tramways in Algeria and a maintenance contract in UK.
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Thursday's Scheduled AGMs/EGMs
Debenhams
Cambria Automobiles
Caffyns (re new articles of association)
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By Tom Waite; thomaslwaite@alliancenews.com; @thomaslwaite
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