Next Share News (NXT)

LONDON (Alliance News) - London shares ended lower Wednesday for a second consecutive session, in a busy day for company news, while the dollar suffered as the US economy grew by less than expected in the first quarter.

Investors' focus now will turn to the US Federal Reserve's interest rate decision after the European market close, due at 1900 BST.

The FTSE 100 ended down 1.2% at 6,946.28, while the FTSE 250 closed down 1.0% at 17,481.19. The AIM All-Share finished down 0.2% at 752.40.

Europe's main indices performed even worse than London, with the CAC 40 in Paris down 2.5% and the DAX 30 in Frankfurt down 3.1%. At the European equity markets close, Wall Street was lower, with the DJIA down 0.3%, the S&P 500 down 0.4% and the Nasdaq Composite down 0.4%.

While US economic growth in the first three months of 2015 was expected to be weak due to severe winter weather, the US Commerce Department released a report on Wednesday showing that gross domestic product increased by even less than anticipated.

US GDP inched up by just 0.2% in the first quarter following the 2.2% growth seen in the fourth quarter. The modest uptick compared to economist estimates for an increase of about 1.0%. The report showed a significant slowdown in the pace of consumer spending growth, as the rough weather kept consumers away from stores despite the recent drop in energy prices.

The Commerce Department said the slowdown in GDP growth was partly offset by upturns in private inventory investment and federal government spending and by a deceleration in imports, which are a subtraction in the calculation of GDP.

Despite the disappointing data, many economists noted that the weakness was primarily due to temporary factors such as the weather. The pace of US economic growth is expected to see a significant re-acceleration in the second quarter of 2015.

"Temporary factors can have quite big impacts on quarterly growth, especially when three come along at once (weather, low oil prices and rapid strengthening of the dollar)," said Craig Erlam, senior market analyst at Oanda.

The dollar fell against the pound and the euro following the release of the US GDP figures, with the pound trading at USD1.5449 and the euro trading at USD1.1146 at European equity markets close.

However, the GDP figures are not the last word on the day, as the market still awaits the Fed's interest rate decision.

"The EUR/USD will be among the FX pairs to watch this evening when the Federal Open Market Committee delivers its much-anticipated policy statement," said Fawad Razaqzada, analyst at Forex.com. "If the Fed discounts the soft patch in data as temporary then it may inadvertently send out a less doveish signal to the market than expected."

On the London Stock Exchange, Weir Group was the best performer in the FTSE 100. Shares in the engineering company ended up 5.6%, even though it said its order input in the first quarter fell 9% due to weak demand in oil and gas markets, which it expects to continue in the second quarter and which will result in further cost cuts being made. However, Weir said its minerals business remained resilient, with order input rising 5% and continued aftermarket growth partially offsetting the oil and gas-related challenges.

Analysts were divided over Weir's first quarter figures. Liberum reiterated its Sell rating on the stock suggesting that consensus estimates will continue to further decline. Weir has not given explicit market guidance for 2015 other than that the company expects a significant reduction in revenue and pressure on operating margins.

However, analysts at Brewin Dolphin took a slightly more positive stance on the company, saying that Weir released a mixed set of results, but despite Oil and Gas being weaker, the performance of Minerals was better than expected. As a result, Brewin said it believes Weir shares can recover in the second half of the year.

Next was the second biggest gainer, up 2.0%, after it reported full-price sales growth in the first quarter of 2015 that ran ahead of the guidance it gave for the first half as a whole, citing the earlier launch of its summer "New-In" brochure which "helpfully" coinciding with much warmer weather, but it still maintained its guidance for the full-year.

Meanwhile, Intercontinental Hotels Group was the third best performer in the blue-chip index, up 1.5%, amid speculation of a potential bid from US peer Starwood, which said Wednesday its board of directors has decided to explore a full range of strategic and financial alternatives to increase shareholder value.

In the FTSE 250, Greggs was the second biggest gainer, up 7.5%. The bakery and food-to-go chain announced a GBP20 million special dividend but cancelled a GBP10 million share buyback after it completed a review of its capital structure, and said it now expects its results in the first half of its financial year to be ahead of its previous expectations after a strong first quarter.

N Brown was the best performer in the mid-cap index, up 8.7%, even though the clothing retailer reported a 21% decline in profit to GBP76.3 million from GBP96.8 million a year before, having issued a profit warning back in March. Revenue fell only slightly though, to GBP818.0 million from GBP818.9 million. Both the group's final and total dividend for the year were held flat at 8.56 pence and 14.23p, respectively.

NMC Health also was amongst the biggest mid-cap gainers, up 7.0%, after it said it has made two further acquisitions in the United Arab Emirates, with the purchase of in-home healthcare services company Americare Group and medical centre operator Dr Sunny Healthcare Group. NMC paid USD100 million for the two companies, and will fund the deals via existing cash and debt resources.

In another full UK corporate calendar Thursday, Royal Bank of Scotland Group, Royal Dutch Shell, Smith & Nephew and International Consolidated Airlines Group release first-quarter results. Schroders and Tullow Oil issue first-quarter interim management statements. James Fisher & Sons, STV Group and Howden Joinery Group issue interim management statements. Shire publishes its first quarter results at 1200 BST, while Globo releases its full-year results.

In the economic calendar, Bank of Japan's interest rate decision is due at 0400 BST. Meanwhile, German retail sales and unemployment rate are due at 0700 BST and 0855 BST, respectively. Italian and eurozone's CPI are due at 1000 BST. In the US, jobless claims are due at 1330 BST.

By Daniel Ruiz; danielruiz@alliancenews.com

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