LONDON MARKET CLOSE: Stocks Finish Lower Amid Sell-Off In US

(Alliance News) - Stocks in London closed in the negative territory on Thursday, following a sell-off at the open of the New York markets, as investors are taking out profit after three consecutive days of gains.

The FTSE 100 index closed down 90.09 points, or 1.5%, at 5,850.86 on Thursday. The FTSE 250 ended down 244.73 points, or 1.4%, at 17,459.69, and the AIM All-Share closed down 14.52 points, or 1.5%, at 953.56.

The Cboe UK 100 ended down 1.5% at 582.05, the Cboe UK 250 closed down 0.9% at 14,888.70, and the Cboe Small Companies ended up 0.7% at 9,448.77.

In European equities on Wednesday, the CAC 40 in Paris ended down 0.7% and the DAX 30 in Frankfurt down 1.6%.

"European equity markets were enjoying a rally earlier today on the back of hopes regarding a vaccine for the coronavirus, but the painful move lower in the US has weighed on indices on this side of the Atlantic," said CMC Markets UK analyst David Madden.

"The sharp falls seen in the US have prompted selling in Europe."

Stocks in New York were mixed at the London equities close, with the Dow Jones down 1.8%, the S&P 500 index down 2.5%, and the Nasdaq Composite down 3.8%.

"To an extent today's sharp slump in tech stocks appears to be a case of shifting assets, with better-than-expected jobs data and rising expectations of a Trump election win boosting the case for investment in those stocks heavily hit throughout this crisis," said Joshua Mahony, senior market analyst at IG.

Data from IHS Markit and the Institute for Supply Management showed a strong expansion in business activity across the US service sector, as output rose at the sharpest rate for nearly one and a half years.

The seasonally adjusted final IHS Markit US Services purchasing managers' business activity index registered 55.0 in August, up notably from 50.0 in July and slightly higher than the earlier flash estimate of 54.8.

Firms often stated that the upturn in output was due to greater client demand and the further reopening of businesses, IHS Markit said.

Separately, the latest services ISM registered 56.9%, 1.2 percentage points lower than the July reading of 58.1%. This reading represents growth in the services sector for the third straight month after April's and May's contraction.

According to the services PMI, 15 services industries reported growth.

"Respondents' comments are mostly optimistic and industry specific about business conditions and the economy as businesses are starting to reopen. Industries that have not reopened remain concerned about the ongoing uncertainty. There is a challenge with capacity and logistics due to the pandemic and the impact on deliveries and order fulfilment," said Anthony Nieves, chair of the ISM.

In Friday's economic calendar, there is UK Construction PMI at 0930 BST and US jobs report for August at 1330 BST.

On the LSE, Melrose Industries was the best blue-chip performer, closing up 13% after the industrial turnaround specialist said it has seen positive signs for a recovery in its markets as coronavirus lockdown measures ease.

For the half year ended June 30, revenue fell 26% to GBP4.12 billion from GBP5.57 billion last year and its pretax loss widened to GBP685 million from GBP109 million a year before.

The company has high exposure to the battered aerospace and automotive sectors following its acquisition of GKN in 2018.

Melrose said trading over the summer months has been at the higher end of expectations, particularly in automotive and key Nortek markets. The company also backed its business model to "once again deliver" in the challenging circumstances brought about by the pandemic.

Melrose added that organically, it sees some early signs of recovery in certain geographies.

"We remain confident in the management's ability to navigate through these difficult times and see the green shoots of recovery as a promising sign with trading in China already ahead of last year and North America improving quickly," said analysts at the Share Centre.

At the other end of the large caps was Next, finishing down 4.4% after Morgan Stanley cut the clothing and homewares retailer to Underweight from Equal Weight.

Admiral Group closed 4.2% lower after the stock went ex-dividend, meaning new buyers no longer qualify for the latest payout.

Among the mid-caps, Greencoat UK Wind closed down 5.1% after launching a 12-month share issuance programme, with an initial tranche being offered starting Thursday.

Under the programme, Greencoat may issue up to a maximum of 750 million new shares over the next 12 months, but will immediately open an initial placing at an issue price of 131p each. The total number of shares offered in the initial tranche was not specified.

The net proceeds from the initial tranche, the company said, are expected to be used to repay amounts drawn under the company's facility agreement. The net proceeds from each subsequent tranche will be used to help repay its facility agreement and may be used to make further investments.

The UK corporate calendar for Friday has half-year results from property assets manager Capital & Regional.

Gold was quoted at USD1,926.09 an ounce at the London equities close Thursday, down from USD1,941.20 late Wednesday.

Brent oil was quoted at USD43.42 a barrel at the London equities close Thursday from USD44.82 late Wednesday.

Downing Street has accused EU chief negotiator Michel Barnier of painting a "misleading representation" of the UK's post-Brexit proposals to deflect from Brussels' "unrealistic" position.

No 10 struck back on Thursday after Barnier warned that the UK is risking crashing out of the bloc without a deal at the end of the transition because it is refusing to compromise.

The negotiations are particularly deadlocked over fishing policy, with Britain demanding a relationship similar to the EU's with Norway.

But Barnier, in a speech on Wednesday, said he was "worried and disappointed" over a lack of concessions and said there would be no agreement if the UK did not budge over fisheries.

Informal talks this week between Barnier and his UK counterpart David Frost failed to find a breakthrough ahead of the eighth round of formal negotiations which begin in London next week.

The pound was quoted at USD1.3272 at the London equities close Thursday, lower compared to USD1.3302 at the close on Wednesday.

The euro stood at USD1.1825 at the European equities close Thursday, lower than USD1.1834 at the same time on Wednesday. Against the yen, the dollar was trading at JPY106.17, higher compared to JPY106.14 late Wednesday.

By Evelina Grecenko; evelinagrecenko@alliancenews.com

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