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(Alliance News) - The FTSE 100's losses had deepened by midday on Thursday, with Pearson and Whitbread continuing to weigh on the UK blue-chip index.
Focus in the day ahead lies on earnings from US bank Morgan Stanley following stellar numbers earlier in the week from JPMorgan and Citigroup and a more disappointing showing from Goldman Sachs.
The FTSE 100 index was down 34.89 points, or 0.5%, at 7,607.91 on Thursday. The mid-cap FTSE 250 index was down 65.85 points, or 0.3%, at 21,647.26. The AIM All-Share index was down 0.2% at 969.43.
The Cboe UK 100 index was down down 0.4% at 12,889.7. The Cboe 250 was 0.4% lower at 19,552.53, and the Cboe Small Companies down 1.1% at 12,372.18.
In mainland Europe, the CAC 40 in Paris was down 0.1%, while the DAX 30 in Frankfurt was 0.3% lower early Thursday afternoon.
"European stock markets are a little flat again on Thursday, with the US-China signing ceremony a day earlier failing to provide much excitement or spark another rally," said Craig Erlam at Oanda.
"Thankfully, earnings season will provide a handy distraction and may give investors reason to feel cheerful and bullish, even at these levels," he added. "It's got off to a mixed start, but I feel that may be the theme for much of the next few weeks."
The US is called for a higher start on Thursday, with the Dow Jones seen up 0.3% and the S&P likewise, while the Nasdaq is pointed up 0.4%.
In the economic calendar are US retail sales at 1330 GMT, while on the corporate side there are fourth quarter earnings from bank Morgan Stanley.
"Dealers will be keeping an eye on the banks trading operation seeing as the likes of JPMorgan and Goldman Sachs produced well-received figures this earnings season. In the third-quarter, Morgan Stanley posted an impressive jump in bond trading revenue, but net interest income slipped, and that pattern could be continued today," said David Madden at CMC Markets.
Meanwhile, FXStreet consensus sees US retail sales rising 0.3% month-on-month in December, accelerating from November's 0.2% growth.
Ahead of this, the minutes from European Central Bank's most recent monetary policy meeting are out at 1230 GMT.
The euro was quoted at USD1.1159 Thursday midday, unchanged from late Wedesday. Against the yen, the dollar was quoted at JPY109.97 versus JPY109.94.
Sterling was trading at USD1.3056 on Thursday, up from on USD1.3024 at the London equities close on Wednesday.
In commodities, gold was quoted at USD1,555.46 on Thursday, up from USD1,549.30 late Wednesday. Brent was quoted at USD64.24, up from USD63.70.
In London, Associated British Foods was the top blue-chip performer, up 3.1% after posting a solid trading update.
Group sales for the 16 weeks to January 4 were up 4% year-on-year at constant currency, and 3% ahead at actual rates.
Primark sales were up 3.0% year-on-year, or 4.5% higher at constant currency. AB Foods attributed this to an increase in Primark's selling space, rather than like-for-like sales growth. Elsewhere, the period to January 4 saw sales rise in the Sugar unit and the Ingredients unit and revenue climb in the agriculture business.
Pearson's trading update was significantly less well received, the stock down 6.2%.
Pearson said its underlying revenue for 2019 was flat, while adjusted operating profit was GBP590 million, within its guidance range, and up 8.1% from GBP546 million in 2018.
US Higher Education Courseware revenue declined by 12%, though there was "modest" growth in digital revenue. Pearson said it expects the trends seen in the unit to continue, with heavy declines in print partially offset by modest growth in digital.
For 2020, Pearson expects to deliver adjusted operating profit between GBP500 million to GBP580 million, including the 25% stake in Penguin Random House that it recently agreed to sell for USD675 million.
"Fundamentally US students are not buying as many expensive academic textbooks, instead using eBooks and online journals. And Pearson's own digital business isn't growing fast enough to make up the shortfall. Things don't look likely to get any better here this year based on the company's outlook comments," said Russ Mould, investment director at AJ Bell.
Whitbread, down 4.3%, issued a cautious outlook for the 2021 financial year.
Total UK sales in the third quarter were up 0.3%, though they fell 1.3% on a like-for-like basis. UK & International total sales growth was 1.0%.
The start of the fourth quarter has seen more positive regional UK data due to lower comparators and the timing of Christmas, the company continued, along with the continuation of the strong London market. However, "it is still early" in the fourth quarter and "a level of caution" remains on the UK hotel environment, Whitbread added.
Looking into the 2021 financial year, the company noted that the UK backdrop remains "uncertain" and sustained industry inflation continues. Whitbread said it will take a cautious approach to hotel demand and expects a net margin headwind of around GBP60 million, comprising wage inflation and ongoing investment, partially offset by its efficient programme.
In the FTSE 250, John Wood Group guided for earnings growth in 2019, despite revenue remaining flat, as markets improved. The stock was up 6.8%.
Aberdeen-based John Wood sees adjusted earnings before interest, tax, depreciation and amortisation of between USD850 million and USD860 million in 2019, compared to USD694 million a year prior. This suggests a 22% to 24% rise year-on-year.
Looking ahead, the company said it is well-positioned. It sees an uptick in activity in the Asia Pacific and the Middle East, though geopolitical tensions may pose a risk. The company expects "modest" revenue growth in 2020 and an increase in adjusted earnings before interest, tax, depreciation and amortisation.
Spirent dipped 7.1% after Barclays cut the telecommunications network testing and analytics firm to Underweight from Equal Weight.
Elsewhere in London, N Brown shares slumped 24% on a profit warning.
Total revenue in the 18 weeks to January 4 fell by 5.0%. Womenswear saw revenue rise by 1.1% year-on-year, with digital revenue up 6.7%, predominantly due to growth in its Simply Be brand.
In Financial Services, which allows customers to pay for purchases on credit, revenue was down by 4.6%, however. N Brown said it was forced to continue "tightening its lending criteria".
Full-year adjusted pretax profit is expected to be in the range of GBP70 million and GBP72 million, compared with the market consensus range of GBP78.0 million and GBP84.1 million.
By Lucy Heming; lucyheming@alliancenews.com
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