LONDON MARKET CLOSE: FTSE 100 Hit By Bond Volatility; Election Eyed

LONDON (Alliance News) - The FTSE 100 ended lower Thursday as equity markets reacted to a sell off in bond markets, particularly German bunds, with Wm Morrison Supermarkets ending as the worst performing stock after it reported yet another decline in sales.

Some investors were also reported to be hesitant as UK voters headed to polling booths in a General Election that is too close to call and could result in a hung parliament.

"Election Day uncertainty has created hesitancy in markets rather than outright fear of the unknown. There's hardly been a tidal wave of selling but seemingly an unwillingness to jump in with two feet to any stocks until the election result is known," said Jasper Lawler, analyst at CMC Markets.

"The city is pricing in another coalition, which hasn't actually proved to be too bad for the economy in the last four years. Since a coalition is expected, a majority could actually provide to be the kind of shock needed to create a substantial move in prices. Since a conclusive result probably won't be clear for a number of days, any sudden movements on Friday seem unlikely," he added.

If no party wins a clear majority in parliament, as expected, then there could be several days of horse trading as the main parties try and put together a coalition.

The FTSE 100 closed down 0.7% at 6,886.95, but the FTSE 250 ended up 0.2% at 17,447.96. The AIM All-Share index closed down 0.4% at 748.62.

European stock markets came under pressure during morning trade as bond prices continued a recent fall, sending yields higher. However, equity markets recovered later in the session as the pressure on the bond markets eased. Analysts said there was no clear reason for the increased volatility in the bond markets.

In Europe, the CAC 40 in Paris closed down 0.3%, while the DAX 30 in Frankfurt ended up 0.5%, after the midday bond sell-off reversed.

When the European equity markets closed, the DJIA and the Nasdaq Composite were both up 0.5% and the S&P 500 was up 0.4%.

The recent rally in oil prices ran out of steam as Iran announced it will boost production immediately when sanctions are lifted. Brent oil slipped to a low of USD65.99 a barrel, having hit its highest price since December on Wednesday of USD69.59 a barrel. West Texas Intermediate hit a low of USD59.13 a barrel.

Shares in BP, which also went ex-dividend, fell 3.4%, Royal Dutch Shell 'B' fell 2.5%, and BG Group closed down 2.1%. In the FTSE 250, Tullow Oil was the worst performer, down 5.6%, with SOCO international down 4.5%, and Petrofac down 5.4%.

The FTSE 350 Oil Equipment, Services and Distribution index closed down 3.9%, the worst performing sector index, while the FTSE 350 Oil and Gas producers index declined 2.6%.

On the flip side, travel stocks closed higher, with International Consolidated Airlines Group ending up 3.1%, Carnival up 3.7%, the best performing stock in the FTSE 100, and easyJet up 2.7%.

EasyJet also said Thursday that it flew 6.0 million passengers in April, up from 5.8 million a year earlier, while its load factor, a measure of how many paid seats are filled on its planes, rose to 90.8% from 89.8%. For the 12 months to the end of April, it flew 66.2 million passengers, up from 62.4 million in the previous 12 months, while its load factor improved to 91.0% from 89.7%.

IAG, meanwhile, said its traffic measured in revenue passenger kilometres rose 4.0% on the year in April, and its most-profitable premium traffic rose 5.3%. However, the parent of British Airways and Spanish airlines Iberia and Vueling said capacity in available seat kilometres rose 6.4%, meaning its load factor fell to 78.4%, from 80.2% in April 2014. The capacity increase was greater than the traffic increase at all three airlines.

Morrisons ended down 6.6% after it reported a 2.9% slide in its key sales measure in the first quarter of the financial year, signalling the size of the task that its new chief executive has on his hands as he tries to turn the company around and attract back the customers that have headed elsewhere.

The grocer said total sales including in the 13 weeks to May 3 were down 5.1% on the same period a year earlier, while like-for-like sales including fuel were down 6.6%. Its closely watched like-for-like sales excluding fuel fell 2.9%, which was worse than the 2.6% decline it had reported in the previous quarter albeit a marked improvement on the 7.1% decline it reported a year earlier.

SABMiller ended as the second-best performer in the index, up 3.7%, after subsidiary MillerCoors LLC reported that its first quarter net income increased to USD304.6 million from USD291.2 million last year. Underlying net income, a non-GAAP measure, increased 4.4% to USD304.6 million. MillerCoors said the underlying income growth was driven by higher net pricing, positive sales mix and strong cost control.

Aviva ended up 2.6% after it reported higher levels of new business, bolstered by operations in the UK & Ireland, Europe and Asia. The life insurer also said its integration of Friends Life is ahead of schedule, following the GBP5.6 billion acquisition of its former rival.

In the FTSE 250, TeleCity Group shares soared 21% after it received a GBP2.32 billion takeover approach from American data-centre provider Equinix Inc, a few months after agreeing an all-share deal to acquire data-centre services provider Interxion Holding NV.

Equinix has approached with a potential offer of 1,145 pence per share, payable in a mixture of cash and stock in Equinix. Around 54% of the consideration would be payable in cash, and 46% in Equinix stock. TeleCity shares closed at 1,088.00p.

African Copper shares plummeted 63% after it said it will seek approval from shareholders to cancel its trading on AIM and in Botswana at a general meeting to be held towards the end of May due to the company's size and lack of liquidity, a proposition that has already gained support from the company's largest shareholders.

The company, which closed as the worst performer in the AIM All-Share index, said it is suffering from a "lack of demand" for its shares which is making it difficult to use the listings to raise money from investors, adding that the "low liquidity" in the company's shares could lead to "volatility" in the share price.

In the economic calendar Friday, German industrial production and trade balances data is at 0700 BST, ahead of UK trade balances data at 0930 BST. Later in the day, investors' attention will be firmly focused on US nonfarm payrolls, wage and unemployment data at 1330 BST.

In the UK corporate calendar, oil and gas producer BG Group issues first quarter results. Rolls-Royce Holdings, InterContinental Hotels Group, BBA Aviation, Man Group and Laird all release interim management statements.

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

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