LONDON (Alliance News) - Shares opened lower in London Thursday, after Brent oil touched a new record low overnight, while retailers continued to dominate corporate news, including some surprisingly positive Christmas sales updates.
The FTSE 100 index was down 1.3% at 5,883.79 points, the FTSE 250 down 1.0% at 16,520.54 and the AIM All-Share down 0.4% at 715.93 points. In Europe, the French CAC 40 index and the German DAX 30 were both down 1.4%.
Shares in Tesco and Burberry Group were among the a handful of gainers in the FTSE 100 at the open.
Tesco, the UK's largest retailer, was the best blue-chip performer, up 6.8%. It 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.
Tesco 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.
Shares in British heritage brand Burberry, known for its scarves and trench coats, was up 4.3%. It 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 luxury goods retailer 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. Burberry shares have suffered in recent months from concerns about a slowdown in sales in China and Hong Kong, two key markets for Burberry.
Meanwhile, blue-chip BHP Billiton was another gainer, up 1.3% after Citigroup upgraded the miner to Buy from Neutral.
At the other side of the index, Merlin Entertainment was down 5.4%, after it was cut to Underweight from Neutral by JPMorgan.
In the FTSE 250, JD Sports Fashion was the best mid-cap performer, up 6.6%. The sports and outdoor clothing retailer said trading remained good during the key Christmas period, with like-for-like sales rising, and it upgraded its expectations for the year to the end of January again.
The group, 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.
Home Retail Group was up 3.1%. The 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. It 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.
Home Retail said trading patterns for Argos were affected by the Black Friday promotion, a shift in consumer demand around that event and reduced footfall at high street stores. 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.
The Restaurant Group was at the bottom of the FTSE 250, down 15%, after saying it expects its full year earnings to be substantially ahead of the previous year after revenue rose by 8.0%, but warned it is more cautious about 2016 over concerns about like-for-like sales trending lower.
The restaurant operator said total turnover in the 52 week period ended December 27 rose 7.9%, with like-for-like sales growing by 1.5%. That is expected to lead to "material growth" to the company's full year earnings and cashflow, but profits will be in line with current expectations, it said.
However, the company also noted that recent data from the retail sector and the wider economy has shown that the trading environment for many consumer facing businesses has been tougher in recent months than it was earlier in 2015.
Oil-related stocks in London were down after the heavy slump in oil prices on Wednesday. Brent crude was quoted at USD30.29 a barrel, having touched a low of USD29.69 a barrel overnight. Similarly, US benchmark West Texas Intermediate was standing at USD30.72 a barrel before the London open. WTI also slipped below the USD30 line on Tuesday, touching USD29.92 a barrel.
A report from the US Energy Information Administration showed Wednesday that crude stockpiles in the US rose by 234,000 barrels in the week ended January 8, well below the 2.5 million barrel increase that was expected by analysts. However, inventories of gasoline increased by 8.4 million barrels, following a 10.6 million barrel rise the previous week. This was much bigger than the 1.6 million barrel build that analysts had estimated.
Shares in BP were down 1.3%. BG Group was down 1.0% and Royal Dutch Shell 'B' shares down 0.8%. Mid-caps Nostrum Oil and Tullow Oil were down 1.9% and 1.3%, respectively.
The Bank of England is widely expected to keep UK interest rates at their current record low level when it releases its monetary policy decision at 1200 GMT, with analysts foreseeing a number of obstacles in the bank's path before a rate hike can even be considered.
The BoE faces numerous risks and uncertainties, which could see caution among members of the Monetary Policy Committee as they decide whether to lift the BoE's bank rate from 0.5%. These risks include the deflationary pressure from the further falls in already-low oil prices, the recent China-triggered turmoil in stock markets and commodities, and the diverging policies of the US Federal Reserve and European Central Bank.
"Today's domestic focus will be on the MPC policy announcement and meeting minutes, even though these seem very unlikely to herald any near-term UK policy tightening," says Lloyds Bank. "Indeed, the case for an early move has been undermined both by downward revisions to UK growth momentum over 2015, and signs that pay pressures are failing to materialise. On balance, we still expect Ian McCafferty to plump for a vote for an immediate policy tightening."
Also in the economic calendar Thursday, the ECB releases the monetary policy meeting accounts from its last meeting at 1230 GMT. In the US, initial and continuing jobless claims data are due at 1330 GMT, while EIA Natural gas storage data are expected at 1530 GMT. At 1330 GMT, James Bullard, the president of the Federal Reserve Bank of St Louis gives a speech in Memphis before the Economic Club of Memphis.
By Daniel Ruiz; danielruiz@alliancenews.com
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