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LONDON (Alliance News) - Stocks in the UK were lower Friday midday, with investor confidence chilled by warnings from both the Bank of England and International Monetary Fund of a possible recession in the UK in the event of a vote to leave the European Union.

"The negative reaction that greeted the BoE's Brexit warning yesterday afternoon has continued into Friday morning, with a wave of red at the European open," said Spreadex analyst Connor Campbell.

The FTSE 100 was down 0.5%, or 30.77 points, at 6,073.42, adding to the 1.0% loss suffered on Thursday.

BoE Governor Mark Carney warned on Thursday that the risks of a vote to leave in the EU referendum scheduled for June 23 "could possibly include a technical recession". The BoE downgraded its UK economic growth forecasts for 2016 to 2.0% from the 2.2% estimated in February, and reduced its projection for 2017 to 2.3% from 2.4%.

The IMF supported the BoE's view on Friday, saying that a Brexit would result in a "protracted period of heightened uncertainty" for the UK, with a likely hit to output and "sizeable" long-term losses in income.

The pound barely moved on Thursday compared to its level at the London equities close on Wednesday. The picture was similar on Friday midday, with sterling standing at USD1.4416 against USD1.4476 at the close Thursday.

UK investor sentiment didn't improve Friday after a report from the Office for National Statistics showed that monthly construction output in the UK slumped in March, coming in below expectations.

Construction output shrank 3.6% in March month-on-month, the worst monthly contraction since December 2012. The decline was weaker than the 3.2% decline expected by economists. For the first quarter to the end of March, output declined 1.1% compared to the fourth quarter of 2015 and by 1.9% year-on-year.

The slowdown comes in the wake of a report on Wednesday showing that industrial output slipped into recession in March for the first time since 2012, while manufacturing growth fell at the sharpest annual rate seen in three years.

Among individual stocks in the FTSE 100, Inmarsat was the worst blue-chip performer, down 6.8% at 740.00 pence. The stock hit a low of 730.00p earlier in the session, its lowest level since November 2014. The satellite business's shares have lost around 21% of their value since the group revised down its 2016 revenue guidance last week. In the year to date, the stock is down 35%.

Berenberg said the main culprit of Inmarsat's decline Friday was a read-across from Eutelsat results. The French satellite operator said its revenue growth in the third quarter was below expectations and now expects full year to be broadly flat

"With Inmarsat citing timing of revenue ramp rather than structural issues for its recent guidance cut, we see increased risk to both the 2018 and five-year guidance," Berenberg said.

Coca Cola HBC was another blue-chip decliner, down 5.4%. The soft drinks bottler said reported volumes were broadly stable in the first quarter, with good growth in emerging markets offsetting a weaker performance in developing and emerging countries, but its shares were sold as net sales revenue declined.

Shore Capital said the update was "slightly behind market expectations". Coca Cola HBC said total volumes grew 0.1% in the quarter to the end of March to 439.6 million unit cases. In the first quarter of 2015, Coca Cola reported 439.0 million unit cases. Net sales revenue, however, declined 2.7% in the quarter to EUR1.32 billion, primarily driven by currency weakness. In constant currencies, net sales revenue increased 2.0%. A year ago, Coca Cola reported revenue of EUR1.35 billion.

Shore Capital said both metrics missed consensus expectations of 442.5 million unit cases and revenue of EUR1.33 billion.

ITV was down 3.1%, following price target cuts by UBS, Barclays and Deutsche Bank. Shares in the broadcaster were adding to the losses seen on Thursday, when they fell 2.3%. Despite a positive first quarter update, the company gave on Thursday a lukewarm outlook for advertising due to uncertainty surrounding the upcoming EU referendum.

RSA Insurance Group was dropping 2.1% after Australian bank Macquarie cut the insurer to Underperform from Neutral, according to traders.

Royal Dutch Shell 'A' shares were down 1.1%, after the oil major said it estimates around 2,100 barrels of oil have leaked from its subsea wells in the Gulf of Mexico, forcing the group to shut-in production from four wells that flow to the Brutus platform. The Bureau of Safety and Environmental Enforcement, which is based close by in New Orleans, said the oil sheen is around two miles by thirteen miles in size and around 97 miles south of Port Fourchon, which is Louisiana's most southern port.

A subsidiary of the oil major, Shell Offshore, reported the incident to authorities after noticing the leak in the area of its Glider Field, a group of four subsea wells located in Green Canyon Block 248. The production from those wells flows through a subsea manifold to Shell's Brutus platform, but all of those wells are now shut-in. Importantly, no injuries have been reported and no evacuation activities have been necessary.

Shell Offshore, in its own statement, said "no release is acceptable" but stressed there is no drilling in the area and that the matter is not a "well control incident," suggesting the leak will not get any larger.

The FTSE 250 was down 0.5% at 16,571.97 and the AIM All-Share down 0.1% at 724.68.

Micro Focus International was among the worst mid-cap performers, down 2.7%. Investment vehicle Wizard sold the majority of its stake in the software company via a placing, raising GBP362.0 million in the process, Numis Securities said.

Wizard sold 24.1 million Micro Focus shares, 11% of the company's equity, in the placing at 1,505.00 pence per share. Shares in the company closed at 1,505.00p on Thursday. Following the sale, which was run by Numis together with Credit Suisse Securities, Wizard will hold a 2.6% stake in Micro Focus.

In Europe, the CAC 40 in Paris was down 0.3%, while the DAX 30 in Frankfurt was flat.

The eurozone economy expanded by less than initially estimated in the first quarter, the flash estimate from Eurostat showed. Gross domestic product climbed 0.5% in the first quarter from the prior quarter, when it grew 0.3%. Eurostat previously estimated 0.6% growth for the first three months of 2016. On a yearly basis, GDP growth eased marginally to 1.5% from 1.6%. The annual growth rate for the first quarter was revised down from 1.6%.

Conversely, the German GDP expanded 0.7% sequentially in the first quarter, faster than the 0.3% growth in previous three months and 0.6% growth forecast by economists. GDP climbed 1.3% on a yearly basis, weaker than the 2.1% expansion seen in the previous quarter. On a calendar-adjusted basis, GDP growth improved to 1.6% from 1.3%.

Still ahead in the economic calendar Friday, US producer price figures are expected at 1330 BST, followed by the Reuters/Michigan Consumer Sentiment Index and business inventories at 1500 BST.

Stocks in New York are called for a negative open, with the Dow 30, the S&P 500 and the Nasdaq 100 all seen down 0.4%.

In Asia on Friday, the Japanese Nikkei 225 index ended down 1.4%. In China, the Shanghai Composite fell 0.3%, while the Hang Seng index in Hong Kong dropped 1.0%.

By Daniel Ruiz; danielruiz@alliancenews.com

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