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LONDON (Alliance News) - UK stocks rounded off the shortened week in the red Thursday, stifled by the continued fall in oil prices and commodity stocks, while Next shares fell to their lowest level since 2013 after the fashion retailer struck a cautious tone on the year ahead.
The FTSE 100 ended down 1.5%, or 92.63 points, at 6,106.48. The FTSE 250 fell 1.1%, or 190.29 points, to 16,674.35 and the AIM All-Share edged down 0.2%, down 1.53 points, to 708.80.
European stocks also ended firmly lower. The CAC 40 in Paris fell 2.1% and the DAX 30 in Frankfurt down 1.7%.
On Wall Street at the London close, the Dow Jones Industrial Average was down 0.4%, the S&P 500 was down 0.5% and the Nasdaq Composite was down 0.4%.
Oil prices continued their decline from Wednesday when the US Energy Information Administration showed an increase in its crude oil stockpiles. The was yet another indicator of the supply glut in the industry which helped to send oil prices crashing to multi-year lows earlier this year.
On Thursday, Brent oil fell below the USD40.00 a barrel mark for the first time in a week, before recovering to trade at at USD40.23 at the London stock market close, versus USD40.71 at the same time on Wednesday.
Oil was also pushed lower by a rise in the dollar as US central bankers talked up a sooner-than-expected interest rate hike. St Louis Federal Reserve President James Bullard said Thursday the relatively minor downgrades to the US Federal Reserve's economic outlook suggest the next rate hike "may not be far off provided that the economy evolves as expected."
These comments, along with similar remarks from Bullard's peers over the week, came after last week's release of the Fed's economic projections, which included a dovish dot-path of Fed members' expectations for US interest rates.
At the London close, the euro traded the dollar at USD1.1172, down from its post-Fed meeting high of USD1.1342 last Thursday. Over the same period, the pound slumped to USD1.4154 from USD1.4514, despite a small boost from better-than-expected UK retail sales figures.
The stronger dollar hit commodity prices, with gold falling to a one-month low of USD1,212.28 an ounce Thursday. At the London stock market close it was USD1,219.87. As oil, gold and other commodities, are priced in dollars, a rise in the base currency will make the commodity more expensive when translated into other currencies, therefore putting downward pressure on demand.
"The traditional 'stronger dollar, weaker commodities' trade is back in action in London today, plus a downgrade of the overall sector by Goldman Sachs is doing little for bullish sentiment. Any rally in miners in April is contingent on Chinese stimulus remaining a valid narrative, and right now the market doesn’t believe that will be the case," said IG's senior market analyst Chris Beauchamp.
The commodity price slump hit miners, with Anglo American down 4.3%, Glencore down 3.9%, and Fresnillo, down 3.4%.
Emerging markets focused bank Standard Chartered, which has big lending exposure to the commodities sector ended down 7.0%.
Jasper Lawler, market analyst at CMC Markets, noted that Standard Chartered is likely to have suffered from a read across to peer ANZ Bank which issued a warning over bad loans to the commodity sector.
"The longer commodities prices remain depressed, the harder it is going to be for firms in the resource sector to pay off their debts. Banks are having to write-down these bad loans and more they have to write-down, the less willing they will be to rollover loans to more credit worthy firms in the sector," Lawler said.
Next ended as the worst FTSE 100 performer, down 15% at 5,655.00 pence, having touched its lowest level since December 2013 at 5,555.00p earlier in the session.
The fashion and homewares retailer provided an uncertain outlook for 2016 and raised concerns about shifting consumer habits which could have a detrimental impact on its business.
Pretax profit in the year to January 30 grew to GBP836.1 million from GBP794.8 million the year before, as revenue rose to GBP4.18 billion from GBP4.00 billion.
But the group said the outlook for consumer spending in 2016-17 does not look as "benign" as it had at the start of the recently ended financial year. Simon Wolfson, Next's chief executive, said the "year ahead may well be the toughest we have faced since 2008."
While UK employment is at a record high, growth in real earnings has slowed markedly since September, Next said, adding that consumers may shift spending priorities away from clothing to eating out, travel and recreation.
The cautious outlook flagged by Next dragged on competitor Marks & Spencer Group, down 4.9%, and online clothing retailer ASOS, down 4.2%.
Energy and utility group SSE was among few blue-chip risers on the day, up 0.3% as it pledged to increase its dividend for the year to the end of March despite guiding to lower adjusted earnings per share and warning on an uncertain market.
SSE said it expects to report adjusted earnings per share to be in the range of 117.0 to 119.0 pence for the financial year to the end of March, which would be down from the 124.1p reported in the previous year.
Profits from its retail business, which supplies electricity and gas to UK households and businesses, will be lower year-on-year whilst its wholesale division covering the production and storage of gas alongside electricity generation is expected to report broadly flat profits.
"The operating environment remains challenging, due to factors including falling commodity prices and increased retail market competition, and the Competition & Markets Authority's provisional decision on remedies represents a substantial and in places challenging package," said SSE Finance Director Gregor Alexander.
The mid-cap index was dominated by some hefty fallers, with Renishaw, which makes a range of precision measurement, 3D laser scanning and healthcare products, down 8.7% after trimming its profit and revenue guidance for 2016.
Renishaw has consistently warned profit and revenue for the current financial year would fall against the prior year owing to large one-off orders not repeating.
On Thursday, however, Renishaw said trading conditions have weakened in the second half, leaving it now expecting pretax profit of GBP67.0 million to GBP83.0 million for the full year, down from its previous guidance of GBP85.0 million to GBP105.0 million.
It also cut its revenue guidance for the second time this year, down to GBP420.0 million to GBP440.0 million from GBP440.0 million to GBP465.0 million previously.
Outsourcer Mitie Group, down 7.0%, said profit for the full year will meet market expectations, but revenue will fall short following a softer second half.
Mitie said its Facilities Management arm has performed well, securing new contracts recently and mobilising a number in the final quarter of the financial year, but its Property Management unit, after a good first half, has seen a second half slowdown.
The Property Management business has been hit by a shift in spending patterns by the company's local authority and housing association clients, ahead of the statutory 1% reduction in social housing rents which will come into force in the UK on April 1.
Premier Foods was back in focus after McCormick & Co, the US spices and flavourings producer, said it is willing to consider increasing its offer for the London-listed maker of Bisto gravy and Mr Kipling cakes.
In a statement, McCormick said it wants to review material pensions documentation, current trading and material contracts to help it decide whether to make a new, higher bid.
McCormick said it could increase its offer to above the 60.00 pence per share bid previously rejected by Premier Foods "if justified following its confirmatory due diligence".
Earlier Thursday, Premier Foods said it is open to considering a higher takeover offer from McCormick, following criticism from major shareholder Standard Life over its decision to work with Japanese noodle maker Nissin Food Co Ltd while refusing to engage with McCormick.
Premier Foods closed down 6.5% to 50.23p.
Still ahead on Thursday are inflation and foreign investment data from Japan at 2330 GMT and 2350 GMT respectively.
On Friday, when the long Easter break gets underway, there are fourth-quarter US GDP data at 1230 GMT.
On Monday, after the clocks go forward in the UK, US core personal consumption and trade balances data are at 1330 BST, pending home sales are at 1500 BST and the Dallas Fed manufacturing business index is at 1530 BST.
In the economic calendar Tuesday, as London prepares to go back to work after the long weekend, Japanese unemployment is at 0030 BST.
Private loan and money supply data for the eurozone follow at 0900 BST, US Redbook index at 1355 BST, just before the S&P/Case-Shiller Home Price indices at 1400 BST and US consumer confidence at 1500 BST.
In the UK corporate calendar, soft drinks company AG Barr and Russian miner Polymetal International publish annual results. Telecommunications software and services firm Artilium publishes interim results and retail, promotional and brand specialist SpaceandPeople releases final results.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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