LONDON MARKET CLOSE: Sterling Rebound, Ex-Divs Send UK Stocks Lower

LONDON (Alliance News) - UK stocks retreated from yesterday's gains to end lower on Thursday, as the FTSE 100 was dragged down by a number of blue-chip stocks going ex-dividend and a recovery in sterling.

"Equity markets are under the cosh this morning from a hat trick of pressures. A dollar sell-off has produced currency hindrance by way of sterling and euro strength to hinder the internationally exposed. Some large-caps have gone ex-dividend. Miners are failing to see a weak dollar benefit in base metals prices," said Mike van Dulken, head of research at Accendo Markets.

The FTSE 100 index ended down 0.3%, or 24.49 points, at 7,277.92. The FTSE 250 closed down 0.7%, or 121.48 points, at 18,705.72, and the AIM All-Share finished down 0.28 point, at 906.46.

The BATS UK 100 ended down 0.5%, at 12,312.98, the BATS 250 closed down 0.6% at 17,025.66, and the BATS Small Companies ended down 0.2% at 10,960.29.

The CAC 40 index in Paris ended down 0.5%, while the DAX 30 in Frankfurt ended down 0.3%.

"Is today the day when investors look at the gains seen since the November 9 and make a calculation as to how much is priced in relative to what President Trump can deliver?" said CMC Market analyst Michael Hewson.

"The US President has promised financial markets something phenomenal in the next couple of weeks; however the big question is will he be able to deliver what the market is pricing in?" said Hewson. "This may help explain why markets in Europe are starting to slide back, with the DAX slipping back from its highs seen earlier this year, above 11,800."

"This would seem an eminently sensible strategy after several days of decent gains which have largely been premised on an improving economic outlook. Even the FTSE 250, which has risen for seven days in a row, has slid lower, while the FTSE 100 appears unable to sustain last nights close above the 7,300 level, as a number of stocks go ex-dividend," Hewson added.

Anchor bottler Coca-Cola HBC led the blue-chip gainers for most of Thursday after hiking its annual dividend payment for 2016 by 10% to EUR0.44 per share following a rise in pretax profit to EUR266.9 million from EUR192.4 million, driven by a reduction in costs. The stock ended as the best performer, up 4.8%.

Shire was the second best performer in FTSE 100 after reporting well-received annual results at midday, as it bolstered confidence in its immediate prospects and growth plans and demonstrated the strength of its major US acquisition Baxalta.

For 2016, Shire reported an operating income of USD962.9 million, down from USD1.42 billion the prior year, as a result of integration and acquisition costs. But Baxalta also drove a jump in product sales to USD10.89 billion from USD6.10 billion, and Shire guided to a further significant lift in product sales in 2017.

Shire closed up 3.5%. Blue-chip peers GlaxoSmithKline, Hikma Pharmaceuticals and Mediclinic closed up 1.8%, 1.1% and 0.9%, respectively.

Fellow FTSE 100 drugmaker Astrazeneca however ended as the worst performer in the index, down 3.1%, as one of many UK stocks to go ex-dividend on Thursday, meaning new investors no longer qualify for previously declared dividend payments.

London's two oil giants also went ex-dividend and ended among the worst blue-chip performers, compounded by a slide in oil prices. Royal Dutch Shell 'A' shares closed down 1.6%, 'B' shares ended 1.8% lower, and BP shares closed down 1.6%.

Brent traded at USD55.33 a barrel at the London equities close on Thursday, dipping from USD55.75 a barrel at the same time Wednesday. Meanwhile, gold went the other way and traded at USD1,240.80 at the London close, rising from USD1,228.92 an ounce on Wednesday.

Lancashire Holdings was comfortably the biggest gainer in the FTSE 250 on Thursday, closing 8.7% higher. Numis and Shore Capital were positive on the company, after the specialist insurer reported "excellent" results "materially ahead" of consensus, despite profit and premiums written dropping in 2016 amid pressure on prices.

Cobham suffered heavily on Thursday after issuing yet another profit warning for 2016 and providing a bleak outlook for the coming year, as the aerospace firm said delivering a performance in 2017 in line with 2016 may prove "challenging". Shares closed down 13.9%, the worst performer in the mid-cap index.

Cobham had already warned on its 2016 results in January, its third downgrade for the year, and it added a fourth warning on Thursday. Cobham said underlying trading profit for 2016 will be around GBP225.0 million, compared to the GBP245.0 million to which it had already cut its guidance back in January.

UK power generator Drax Group was also one of the worst performers in the FTSE 250, closing down 5.8%, after placing its dividend policy under review as its 2016 payout more than halved as a result of a similar fall in underlying earnings, caused by a tough commodity market and the loss of renewable subsidies.

Stocks in New York were pointing lower on Thursday after achieving strong gains on Wednesday on the back of hawkish comments from US Federal Reserve Chair Janet Yellen and positive US economic data. The DJIA was trading 0.2% lower, while the S&P 500 index and NASDAQ Composite were both trading down 0.4%.

The euro was quoted at USD1.0668 at the London close, compared to USD1.0590 at the same time on Wednesday. Sterling recovered from its decline against the dollar on Wednesday, when it traded at USD1.2462 at the London equities close, and was trading at USD1.2493 at the close on Thursday.

"Despite a continued improvement in US economic data the US dollar has struggled to make any further gains today, sliding across the board," said CMC's Hewson.

"Why this US dollar weakness is happening now is difficult to pinpoint, however Fed vice Chair Stanley Fischer's comments to Bloomberg this morning were that the Fed was moving closer to the central bank's target rate for inflation, and as such the time was getting closer to the optimum level for another hike," CMC's Hewson added.

"While these comments were broadly in line with Janet Yellen's they still don't chime with the prospect of a move in March, and that may well be behind today's US dollar weakness," Hewson said.

The economic calendar on Friday starts with the release of Eurozone current accounts by the European Central Bank at 0900 GMT, followed by UK retail sales at 0930 GMT. Eurozone construction output is at 1000 GMT and the Baker Hughes UK oil rig count comes late in the day at 1800 GMT.

Friday's UK corporate calendar sees full year results from warehouse property investor Segro, plastic and fibre product provider Essentra, building materials firm Kingspan Group, Temple Bar Investment Trust, and Millennium & Copthorne Hotels.

By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance

Copyright 2017 Alliance News Limited. All Rights Reserved.