LONDON MARKET CLOSE: Commodity Retreat Ends FTSE 100 Winning Streak

LONDON (Alliance News) - A decline in crude oil prices from fresh 2016 highs and falls in other commodities left UK stocks firmly in the red on Thursday.

"One of the biggest drivers of volatility today has been the comeback in the US dollar, which has sparked a reversal in fortunes across much of the dollar denominated commodities today," said Joshua Mahony, market analyst at IG.

At the London stock market close the pound traded the dollar at USD1.4479, which was lower than the USD1.4550 seen at the close on Wednesday. Similarly, the euro was quoted at USD1.1332 at the close Thursday, versus USD1.1392 on Wednesday.

"While energy and mining stocks have largely been a driver of the gains that have dominated this week's trading, today they are proving by far the largest drag as a result of a sharp downturn in the likes of crude and copper," Mahony added.

Copper miner Antofagasta closed as the biggest FTSE 100 faller, down 6.3%, having also been downgraded by Canaccord to Hold from Buy. Glencore ended down 5.3% and BHP Billiton was down 4.5%. The FTSE 350 Mining sector index closed down 3.6%.

Brent crude fell sharply from its highest level in eight months at USD52.83 a barrel earlier in the day, to trade at USD52.01 at the London equities close Thursday. This was below the USD52.18 seen at the close on Wednesday.

Gold was much more resilient than other commodities, with investors flocking to the safe haven asset. At the London close on Thursday, the metal traded at USD1,269.52 an ounce, a touch higher than the USD1,261.37 seen at the same time on Wednesday.

The FTSE 100 ended the day down 1.1%, or 69.63 points, at 6,231.89. This meant the blue-chip index snapped a run of four successive sessions of gains. The FTSE 250 ended down 0.4%, or 66.26 points, at 17,111.59 and the AIM All-Share ended down 0.1%, or 0.51 points, at 744.13.

In Europe, the CAC 40 in Paris closed down 1.0% and the DAX 30 in Frankfurt closed down 1.3%.

On Wall Street at the London close, the DJIA and the Nasdaq Composite were both down 0.4%, and the S&P 500 was down 0.5%.

In company news, Sky ended as the biggest gainer in the FTSE 100, up 2.9%, after it said it will retain 93% of the broadcasting rights for the Bundesliga football league through to 2021 at an average cost per year of EUR876 million, around 80% higher than it paid under its existing contract.

Sky said that, under its new agreement with the German Professional Football Association, it will pay 32% more in the 2017/18 season, the first year of the new contract, than in the final year of its existing contract.

Over the four years of the new agreement the average costs per year will be EUR876 million, compared to an average of EUR486 million per year under its contract which concludes at the end of the 2016/17 season.

Whilst this increase came in higher than the 50% consensus expected, Haitong Research said considering the steep price increase for Premier League rights last year in the UK, many analysts may have been worried about a much bigger price increase in Germany as well. Haitong said Sky's share price "suggests muted relief".

In the previous auction Sky won all of the broadcasting right packages, however, for this auction a no single buyer rule was implemented preventing it from winning all of the packages again.

Alongside the miners, Vodafone Group was amongst the worst performers in the FTSE 100, closing down 4.9% after going ex-dividend.

Vodafone also said it struck a deal with New Zealand's Sky Network Television to form a new venture in the country through a combination with its Vodafone New Zealand unit.

Sky Network is a pay television provider in New Zealand, established in 1987 and with over 830,000 subscribers. It has no connection to London-listed Sky. Sky-founder Rupert Murdoch's News Corp held a 44% stake in Sky Network for a time, but this was sold in 2013.

Vodafone New Zealand has been operating in the country since 1998 and had over 2.35 million mobile and 500,000 fixed line connections as at the end of March 2016.

Sky Network will buy all the shares in Vodafone New Zealand for a total NZD3.44 billion, equivalent to GBP1.69 billion at current exchange rates, partly through the issue of new shares in Sky Network to Vodafone Europe, giving Vodafone a 51% stake in the business. The remaining cash consideration of NZD1.25 billion will be funded through new debt.

FTSE 250-listed plastic and fibre products company Essentra closed down 28% at 600.00 pence, having earlier touched its lowest level in over three years at 569.00p. The company issued a profit warning for 2016 following a deterioration in trading in its filter products business.

Essentra said it is "unlikely" to meet the trading expectations for the year it had set out in its annual results in February.

Its Filter Products unit, which makes filters for cigarettes, has been hit by a challenging market backdrop and projects either not being commercialised or being delayed.

Due to this, and short-term operational issues in its Health & Personal Care Packaging division, Essentra said its total revenue for 2016 will be broadly flat on the GBP1.10 billion posted a year earlier.

Automotive marketplace operator Auto Trader Group closed as the best mid-cap performer, up 5.4%, after it launched a rolling programme of share buybacks, as its annual pretax profit rocketed higher.

Auto Trader said revenue for the financial year to March 27 rose 10% year-on-year to GBP281.6 million, coming ahead of Numis's GBP279.2 million estimate and the consensus estimate of GBP280.9 million. Numis analyst Paul Richards said this beat was mainly driven by average revenue per retailer, which rose 11% to GBP1,384 over the year.

Auto Trader said it will start a rolling programme of share buybacks with immediate effect, with the majority of the surplus cash left over after dividends have been paid to be returned to shareholders.

The group declared a final dividend of 1.0p per share, meaning its total annual payout will be 1.5p.

After the market close, private equity firm Apax Partners said it plans to sell its entire remaining 1.8% stake in Auto Trader, or up to 18.4 million shares. The final number of shares to be placed will be agreed by bookrunners Deutsche Bank and Bank of America Merrill Lynch. Auto Trader will not receive any proceeds from the share sale.

Apax previously shrunk its Auto Trader stake in February, when the private equity firm sold 233.6 million shares at 365 pence each, raising GBP852.8 million.

In the economic calendar Friday, there are German inflation and wholesale prices data at 0700 BST and Deutsche Bundesbank President Jens Weidmann speaks at 0800 BST. Later in the day there is a preliminary reading of the US Reuters/Michigan Consumer Sentiment Index for June and the US monthly budget statement at 1900 BST.

In the UK corporate calendar, brewer and pub chain Fuller, Smith & Turner reports full-year results, while womenswear retailer Bonmarche Holdings and Edinburgh Worldwide Investment Trust both report half-year results. Recruiter Sthree issues a trading statement.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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