LONDON MARKET CLOSE: Stocks Bounce Back As Markets Regain "Composure"

LONDON (Alliance News) - Stocks in London regained Thursday most of the previous day's losses, but analysts disagreed whether the rebound represented a return of risk appetite or just a pause for breath by a bear market.

The FTSE 100 closed the day up 1.1%, or 70.20 points, at 6,533.79. The blue-chip index is now down only 0.7% for the week, ahead of the key US jobs report on Friday.

On a weekly view, the FTSE 250 still remains down 3.4%, but on Thursday it slightly outperformed the FTSE 100, closing up 1.5%, or 229.10 points, at 15,898.81. The AIM All-Share ended up 0.3%, or 2.39 points, at 699.38.

It was the opposite picture in the London stock market to what was seen on Wednesday. Housebuilders, banks, and real estate investors were the best performers, while gold miners were the worst, giving up some of their safe-haven gains made in the wake of the UK's vote to leave the European Union.

Michael Hewson, chief market analyst at CMC Markets, said the rebound by the market on Thursday may just be a pause for breath as nothing has changed in the past 24 hours.

However, IG's market analyst Josh Mahony believes stock markets in Europe have regained their "composure".

"While today will not steal the headlines given the augmented rallies seen last week, today marks the first day since the referendum result that has truly seen risk appetite return. Not only have we seen sweeping stock market gains, but recent targets such as sterling have gained at the expense of havens such as gold and the Japanese yen," Mahony added.

The price of gold lost some ground Thursday. At the London equity market close, the metal traded at USD1,355.97 an ounce, compared to USD1,367.58 at the close Wednesday.

Oil prices dived late Thursday after the US Energy Information Administration showed US commercial crude stocks declined by less than expected. For the week ending July 1, oil stocks declined by 2.2 million barrels, slightly less than the expected 2.3 million barrels shrinkage. It was significantly less than the 6.7 million barrel decline in the American Petroleum Institute's crude oil stock, which it reported late Wednesday.

At the London equities close, Brent traded at USD47.74 not far off the USD47.61 level seen at the same time on Wednesday.

In stock markets in mainland Europe, the CAC 40 index in Paris ended up 0.8% and the DAX 30 in Frankfurt closed up 0.5%

On Wall Street at the London close, the Dow 30 index was down 0.1%, the S&P 500 was flat, and the Nasdaq Composite was up 0.2%.

Private sector employment in the US increased by more than expected in the month of June, according to a report released by payroll processor ADP.

Private sector employment climbed by 172,000 jobs in June following a downwardly revised increase of 168,000 jobs in May. Economists had expected an increase of about 150,000 jobs compared to the addition of 173,000 jobs originally reported for the previous month.

At the end of London equity trade the euro was valued at USD1.1066, versus USD1.1072 at the close on Wednesday.

The pound gave up some of the gains it made in early trading Thursday. By the European equity closing bell, it bought USD1.2933, marginally above the USD1.2911 rate seen at the same time on Wednesday.

Conservative lawmakers eliminated Justice Secretary Michael Gove from the race to succeed UK Prime Minister David Cameron, leaving party members to choose between Home Secretary Theresa May and Vote Leave campaigner Andrea Leadsom in the final vote.

In UK corporate news, Associated British Foods was the best performer in the FTSE 100, up 8.9%. The company, which owns discount fashion retailer Primark, British Sugar and agriculture and consumer goods businesses, had been facing falling revenue across the business and a deteriorating profit margin in the retail business in recent times as it suffered from the effects of the weak euro against the dollar and pound.

However, at the time of its first-half results in April, AB Foods said foreign exchange translations may no longer have a "material impact" on its full year as sterling had started to weaken, and that adjusted earnings per share would only decline marginally.

On Thursday, AB Foods reiterated an improved outlook for the full year after the pound fell even further following the UK's decision to leave the European Union last month. This time, AB Foods said it expected to see no decline in adjusted earnings per share.

Numis said the fall in sterling will be a mixed blessing for AB Foods. It will see translation benefits for British Sugar, which has a cost base in pounds and revenue in euros, but Primark purchases garments mainly in dollars and sells mainly in the pound and euro.

Marks & Spencer Group ended the day up 1.6%, having spend most of the session amongst the biggest fallers. The food, clothing and homeware retailer reported the worst fall in clothing & home sales in a decade, leaving analysts unimpressed and some observers expressing concern over M&S's outlook in the wake of the Brexit vote.

In the 13 weeks ended July 2, M&S sales fell 0.4% year-on-year, as 4.0% growth in the Food division was wiped out by an 8.3% decline in the Clothing & Home division. On a constant-currency basis, sales for the group were down 0.9%.

Initially Thursday, M&S said group sales had risen 1.3% in the period and were up 0.2% on a constant-currency basis but later Thursday issued a correction to these figures.

The clothing & home decline was far worse than the 1.9% decline experienced in the fourth quarter of the last financial year, and the worst quarterly decline the division has experienced since financial 2005-06.

NCC Group, up 6.5%, said its pretax profit for the year to the end of May was pulled lower by one-off charges, but underlying trading proved very strong and the information assurance group hiked its dividend payout.

Pretax profit for the year to May 31 was GBP9.4 million, down from GBP21.4 million a year earlier as the group booked an GBP18.9 million one-off charge after shutting down its Domain Services business.

Stripping out the one-off charge, adjusted earnings before interest, taxation, depreciation and amortisation for the year was GBP43.7 million, up 48% from GBP29.5 million a year prior.

NCC declared a final dividend of 3.15 pence, taking its total payout up 17% year-on-year to 4.65p. The stock traded up 11%.

Waste management company Shanks Group confirmed a deal to merge with Netherlands-based waste collection and recycling company Van Gansewinkel Groep, a move it said would create a leading player in the Benelux waste management segment.

Shanks said the merger, which values the Dutch company at EUR440.0 million, would make the combined company a leading waste-to-product business in the Benelux region, where significant investment has been put into recycling facilities. The deal also would give Shanks greater access to other European Union markets, in particular to tap specialist recycling technologies segments.

The UK group said a number of synergies could be achieved under the deal, including cutting costs by optimising logistics routes and rationalising sites. The increased scale of the business would help procurement capabilities as well, Shanks said.

Shanks shares had been suspended but resumed trading on Thursday after the announcement.

The main event in the economic calendar Friday is the US jobs report at 1330 BST. The May nonfarm payrolls number came in significantly below expectations at 38,000 net new jobs, and the market will be interested to see if this was just a blip. According to FXStreet, the consensus for June is for a significant rebound to an increase in 178,000 jobs.

Elsewhere in the economic calendar, German trade balances are at 0700 BST, followed by UK trade balances at 0930 BST. The Baker Hughes US oil rig count is issued after the London stock market close at 1800 BST and US consumer credit is at 2000 BST.

There are no scheduled events in the UK corporate calendar.

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

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