LONDON MARKET CLOSE: Commodity, Ex-Dividend Stocks Weigh On FTSE 100

LONDON (Alliance News) - Shares in the London ended mixed Thursday, with commodity stocks and several hefty constituents going ex-dividend weighing on the FTSE 100, amid a flurry of economic data from China, Europe and the US.

The FTSE 100 ended down 1.0% at 5,971.95 points, ending in the red for the first time this week after a strong run in the past four sessions. The FTSE 250 closed up 0.1% at 16,176.75 and the AIM All-Share up 0.7% at 682.54.

In Europe the CAC 40 in Paris ended up 0.2% and the DAX 30 in Frankfurt closed up 0.9%.

Stocks in New York were lower at the London close, with the Dow Jones Industrial Average down 0.2%, the S&P 500 down 0.3% and the Nasdaq Composite down 0.6%.

First-time claims for US unemployment benefits unexpectedly decreased in the week ended February 14, according to a report released by the US Labor Department. The report said initial jobless claims fell to 262,000 from 269,000 the prior week, the lowest level since the week ended November 22. The drop surprised economists, who had expected jobless claims to rise to 275,000.

The report said continuing claims, a reading on the number of people receiving ongoing unemployment assistance, rose by 30,000 to 2.273 million in the week ended February 7.

The US Conference Board released a report showing a modest decrease by its index of leading US economic indicators in January, driven primarily by steep drops in stock prices and weakness in initial jobless claims. The Conference Board said its leading economic index declined by 0.2% in January following a revised 0.3% decrease in December. The modest drop by the index matched economist estimates.

Meanwhile, a report from the Federal Reserve Bank of Philadelphia revealed a modest increase by its index of regional manufacturing activity in February, but the index remained negative for the sixth consecutive month. The Philadelphia Fed said the diffusion index for current activity rose to a negative 2.8 in February from a negative 3.5 in January. A negative reading indicates continued weakness in business conditions. Economists had expected the index to inch up to a negative 3.0.

At the London close, the pound was slightly higher against the dollar. Sterling was quoted at USD1.4331, having stood at USD1.4328 at the close on Wednesday.

The euro was at USD1.1088 at the close, versus USD1.1133 at the close Wednesday.

The European Central Bank warned about "increased downside risks" in the minutes from its monetary policy meeting held January 21, released Thursday.

"Downside risks had increased again since the beginning of the current year, amid heightened uncertainty about the growth prospects of emerging market economies, volatility in financial markets and geopolitical risks," the minutes said.

The ECB minutes said that inflation had continued to be weaker-than-expected, mainly due to the renewed sharp fall in oil prices and the persistently subdued underlying price pressures.

Financial market conditions in the euro area had clearly deteriorated since the early December Governing Council meeting, although the magnitude and persistence of these developments were still uncertain, the report added.

The minutes also said that there was unanimity in the Governing Council in seeking a review of the policy stance in the next meeting on March 10 after a thorough analysis of data and also after receiving the latest ECB Staff macroeconomic projections.

Timo del Carpio, European Economist at RBC Capital markets said he saw little in the minutes that alters the more recent messages from various ECB officials.

"Looking ahead to March 10, a lively discussion on the macroeconomic outlook should again be expected. But with new staff projections and a firm commitment from the Governing Council to reconsider its stance, the Governing Council will have little excuse not to deliver a judgement on the appropriate policy stance the next time around," Del Carpio said.

Meanwhile, data from the ECB showed that the euro area current account surplus declined in December as the surplus on trade in goods and services dropped from the prior month. The current account surplus fell to EUR25.5 billion from EUR26.9 billion in November. The surplus on trade in goods dropped to EUR26.5 billion from EUR27.5 billion and that on services fell to EUR4.6 billion from EUR6 billion a month ago.

In Asia on Thursday, the Japanese Nikkei 225 index closed up 2.3%. The Shanghai Composite ended down 0.2% but the Hang Seng index in Hong Kong closed up 2.3%.

China's inflation accelerated to a five-month high in January, and the producer price index declined at a slower pace, data from the National Bureau of Statistics revealed.

Consumer prices advanced 1.8% year-on-year in January, faster than December's 1.6% increase. This was the highest rate since August 2015, when inflation was 2%, but slightly slower than the 1.9% rise forecast by economists. Producer prices dropped 5.3%, slower than the 5.9% decline seen in December. Prices were expected to fall 5.4%.

Data from the US Energy Information Administration showed that crude stockpiles in the US rose in the week ended February 12. The report said US crude oil inventories soared by 2.14 million barrels last week, compared to the decline of 754,000 barrels from the prior week. Economists expected an increase of 3.92 million barrels.

Following the data, North Sea benchmark Brent oil price dropped substantially, standing at USD34.34 a barrel at the London close, compared to USD35.34 prior. US benchmark West Texas Intermediate was also hit, falling to USD30.87 at the close versus USD31.65 before the data.

BP ended down 1.5%, while in the FTSE 250 Petrofac and Wood Group dropped 5.0% and 2.1%, respectively.

Meanwhile, shares in Tullow Oil ended at the bottom of the FTSE 250, down 11%. The oil and gas company said it has implemented extra "operational procedures" on the floating production, storage and offloading vessel serving the Jubilee field offshore Ghana after identifying an potential issue in the turret area.

Tullow said an inspection of the turret area of the FPSO was carried out by SOFEC, the original manufacturer of the turret, which identified "a potential issue" with the turret bearing.

Royal Dutch 'A' and 'B' shares ended down 3.2% and 2.2%, respectively, having gone ex-dividend alongside pharmaceutical giants GlaxoSmithKline, down 3.3%, and AstraZeneca, down 3.8%.

Shares in FTSE 100-listed mining companies were also sold, giving back some of their gains from Wednesday, with Anglo American down 4.7%, Rio Tinto down 3.1% and Glencore down 1.2%.

Gold was quoted at USD1,217.39 at the London close, adding to its impressive rally since the start of 2016.

At the other end of the index, gas distributor and producer Centrica led the blue-chip gainers, up 3.6%, after it reported full-year results that significantly beat expectations, as the drag on earnings from its upstream unit was not as bad as expected. Centrica reported a 4% fall in net earnings to GBP863.0 million in 2015 from GBP903.0 million in 2014, but the figure was significantly higher than analyst expectations of GBP733.0 million.

Adjusted operating cashflow, which Centrica said would be a "major focus" back in December, came in ahead of the group's guidance at GBP2.25 billion, which was also up 2% from GBP2.20 billion last year. Revenue for 2015 fell 5% to GBP28.00 billion. Centrica will pay a dividend for the year of 12.0 pence per share, down from 13.5 pence in 2014.

Following the results, Jefferies reiterated its Buy rating on Centrica, saying that the full-year results suggest the group's cash flow will remain strong in the current low commodity price environment.

BAE Systems also ended in the green, up 1.7%. The defence contractor provided a brighter outlook for 2016, as had been expected, indicating trading conditions for the group are starting to improve following years of squeezed defence budgets globally.

The defence contractor said its underlying earnings per share in 2016 should be around 5% to 10% higher than in 2015, helped by defence budgets increasing around the world and by growing sales in its cyber security and international sales, the latter of which should be boosted by higher Typhoon support service contract revenue.

This will offset declines in the US and UK, with the US set to see a reduction in naval ship repair activity, while UK sales will fall due to lower planned Typhoon deliveries, though higher submarine programme activity should help to offset falling aircraft carrier sales.

Drugmaker Indivior closed up 16%, making it the best FTSE 250 performer, as investors welcomed full year results from the group, which beat its previously lifted guidance, despite profit about halving in 2015 and the company saying it does not plan to pay further dividends in the "forseeable future".

Indivior has seen a better-than-expected first year as a public company following its spin-out from consumer goods giant Reckitt Benckiser Group in late 2014, despite the higher costs of operating on a standalone basis and increasing generic competition to its key product, Suboxone Film.

Indivior said its pretax profit for the year to the end of December was USD285.0 million, down from USD561.0 million a year earlier. It will pay a final dividend of 9.5 cents per share, taking its total dividend to 12.7 cents.

Transport company Go-Ahead Group closed up 6.0% after it said its first-half results met its expectations and affirmed its outlook for the full year as it saw solid performances in its bus and rail divisions. Pretax profit for the half-year to December 26 was GBP52.1 million, up from GBP44.7 million a year earlier, helped by a big rise in profit from its rail division. Go-Ahead will pay an interim dividend of 28.33 pence per share, up from 26.60p a year earlier.

Shore Capital upgraded the stock to Buy from Hold. The broker noted the company's shares have fallen by 16% year-to-date, giving them an attractive set of multiple and yield metrics.

In the corporate calendar, Coca-Cola HBC, Standard Life, M&C Saatchi, Segro, Essentra and Millennium & Copthorne Hotels release full-year results.

In the economic calendar Friday, Japan's All Industry Activity Index is due at 0330 GMT, while Germany's Producer Price Index is due at 0700 GMT. UK's Retail Sales data are at 0930 GMT, at the same time as UK Public Sector Net Borrowing data. The UK CB Leading economic index is due at 1430 GMT, while eurozone's consumer confidence is at 1500 GMT. In the US, inflation data are due at 1330 GMT.

By Daniel Ruiz; danielruiz@alliancenews.com

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