LONDON (Alliance News) - UK stocks ended largely higher Thursday, getting an early boost after the Chinese central bank said it expects no further depreciation in the yuan but the gains tailed off in late trade after a rise in the dollar pushed down commodities prices.
The dollar continued its advance against the other major currencies, after US retail sales were reported to have improved in line with forecasts in July. Data from the Commerce Department showed that the retail sales rose by 0.6% in July, while revised data showed that sales were unchanged in June. Sales had been expected to climb by 0.6% compared to the 0.3% drop originally reported for the previous month.
Excluding automobile sales, retail sales grew 0.4% in July, matching the revised growth seen in June. The reading was expected to grow 0.5% from the original 0.1% decline in June.
Separately, first-time claims for US unemployment benefits showed a modest increase in the week ended August 8, according to a report released by the Labor Department. Initial jobless claims edged up to 274,000, an increase of 5,000 from the previous week's revised level of 269,000. Economists had expected jobless claims to come in unchanged compared to the 270,000 originally reported for the previous week.
"Jobless claims may have been slightly higher than forecast, but anything below 300,000 is still a Fed-pleasing number. These figures would likely have reassured the central bank after the Chinese hijinks of the past couple of days, and in theory still leave a September lift-off on the cards," said Connor Campbell, financial analyst at Spreadex.
Following the data, sterling hit a low of USD1.5572 and the euro slid to USD1.1079.
The appreciation of the dollar had an adverse effect on commodities, with gold and oil, both priced in dollars, falling. Gold hit an intraday low of USD1,113.50 an ounce. As a result, shares in Randgold Resources closed among the worst performers in the FTSE 100, down 3.2%.
Oil prices also were hit, with US benchmark West Texas Intermediate falling near to a six-and-a-half year low. WTI hit a low of USD42.05 a barrel, while Brent oil hit a low of USD48.82 a barrel.
The decline in oil prices saw Royal Dutch Shell 'A' shares end down 2.6% and BG Group shares end down 1.5%. The two stocks also went ex-dividend, meaning new buyers no longer qualify for the latest dividend payout. In the FTSE 250, Premier Oil, down 5.7%, and Tullow Oil, down 2.8% also were hit by the lower oil prices.
Ophir Energy ended as the worst FTSE 250 performer, down 6.0%. The oil and gas company increased its full-year production guidance and reported a large reduction in spending, as it tries to restructure itself for a USD50 per barrel of oil environment, after swinging to a substantial pretax loss in the first half of 2015.
Ophir said it swung to a USD123.3 million pretax loss in the first half of 2015 from a USD589.4 million profit a year before, when it had booked a one-off gain. Revenue came in at USD86.5 million compared to nil a year earlier.
The FTSE 100 ended flat at 6,568.33, the FTSE 250 closed up 0.9% at 17,595.47, and the AIM All-Share index ended up 0.3% at 750.77.
In Europe, the French CAC 40 closed up 1.3% and the German DAX 30 ended up 0.8%.
In New York at the London close, the Dow 30 and S&P 500 both were down 0.1%, and the Nasdaq Composite was flat.
Before the US economic data, stock markets had been reacting to a third adjustment by the People's Bank of China to its currency. The central bank adjusted its daily reference exchange rate by a further 1.1% on Thursday, setting it at 6.4010 to the US dollar. On Tuesday, the bank had cut the rate by 1.9%, followed by a 1.6% drop on Wednesday.
In a press conference, the People's Bank of China Assistant Governor Zhang Xiaohui said that the yuan depreciation is unlikely to continue, given strong economic fundamentals of the country. The market-oriented exchange rate formation mechanism is more conducive to long-term stability, Yi said, adding that the flexible exchange rate will increase the central bank's monetary policy independence.
On the London Stock Exchange, Coca Cola HBC spent the day as the best performer in the FTSE 100, closing up 7.3%. The soft drinks bottling company reported a rise in profit in the first half of its financial year as it benefited from growth in volumes and margins, although its revenue was hit by adverse foreign exchange rates.
The company reported a pretax profit in the six months ended July 3 of EUR164.7 million, up from the EUR129.2 million profit it made in the same period the year before, although revenue did slip to EUR3.15 billion from EUR3.18 billion.
Coca-Cola HBC said that underlying volume growth gained momentum in the second quarter, leading to a 3.8% rise in the first half, an improvement on the 3.4% decline it suffered in the first half of the prior year. The half year also benefited from four extra selling days in the first quarter, which added 2.5% to volume across the business, it said.
TUI Travel was the second best blue-chip performer up 6.8%. The tourism and travel operator posted higher revenue for the third quarter and for the first nine months of its financial year, despite the recent quarter being overshadowed by the terrorist attack in Tunisia, and said it is confident it will achieve further earnings growth in the full year and beyond, even though it will take a further hit in the fourth quarter from the Tunisian tragedy.
TUI said its earnings before interest, taxation and amortisation rose to EUR130 million from EUR92 million in the third quarter to the end of June and its loss for the first nine months of the year narrowed to EUR239 million from EUR242 million.
It added it is currently confident of delivering underlying earnings growth of 12.5% to 15.0% for its current financial year and at least 10% over each of the next three years, with trading in the summer months so far proving solid.
Outsourcing company G4S closed as the worst FTSE 100 performer down 5.4% after being downgraded by Goldman Sachs to Sell from Neutral, and by Exane BNP to Neutral from Outperform. On Wednesday the company had said its pretax profit fell in the first six months of 2015 due to restructuring and impairment charges, but its revenue edged higher despite a decline in the UK and Ireland.
Cineworld Group closed as the best FTSE 250 performer, up 7.4%. The cinema operator reported growth in profit in the first half of its financial year, boosted by sales of tickets for a number of new films, including 'Fifty Shades of Grey', which broke box office records, and said it is "marginally ahead" of its plans for the full year as a whole.
The company posted growth in pretax profit in the 26 weeks ended July 2 to GBP46.8 million from GBP13.9 million in the same period the year before, as its revenue grew to GBP329.1 million from GBP268.6 million.
Michael Page International ended up 3.7%. The recruitment company said it will pay a special dividend to shareholders, after its pretax profit rose on the back of higher revenue and gross profit in the first half, which defied the currency challenges the group faces.
Pretax profit rose to GBP40.4 million in the half-year ended June 30, up from GBP35.6 million a year before, as total revenue rose to GBP530.4 million from GBP512.2 million. Gross profit, or net fee income, rose to GBP280.9 million from GBP263.7 million.
In the economic calendar Friday there are German GDP data at 0700 BST and eurozone inflation and GDP data at 1000 BST. In the afternoon, there is the US producer price index at 1330 BST and capacity utilisation at 1415 BST, alongside US industrial production.
In the UK corporate calendar, there are half-year results from Finland-based chrome producer Afarak Group and biopharmaceutical company Biofrontera.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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19 Jan 2016 07:49
