LONDON MARKET MIDDAY: Apple Warning Offsets Next-Inspired Retail Gains

LONDON (Alliance News) - Stocks in London traded lower at midday on Thursday as Apple's sales warning shook markets, heightening fears of economic slowdown in China and causing stocks reliant on the country's demand to suffer, such as miners and luxury fashion house Burberry. Despite Burberry's tumble, it was a broadly positive session for clothing retailers after an encouraging Christmas performance from high-street chain Next. The FTSE 100 was down 41.76 points, or 0.6%, at 6,692.47, while the FTSE 250 was 39.53 points lower, or 0.2%, at 17,547.17. The AIM All-Share was up 0.3% at 863.22.The Cboe UK 100 was down 0.5% at 11,358.68, while the Cboe UK 250 was flat at 15,685.40, and the Cboe UK Small Companies up 0.3% at 10,930.93.In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were both down 1.5%.Markets in the US are poised for a sharp fall when they reopen on Thursday, with the Dow Jones seen down 1.6%, the S&P 500 called 1.7% lower and the Nasdaq on course to drop a steep 2.7%. This comes after Nasdaq constituent Apple, after the New York close on Wednesday, uncharacteristically issued a sales warning amid weak trading conditions in China. California-based Apple now expects first-quarter revenue of about USD84 billion, down from its prior estimate of between USD89 billion to USD93 billion. Apple also now expects gross margin of about 38%, at the lower of a previously guided range of between 38% and 38.5%.Apple, describing the quarter as "challenging", said it did not expect the magnitude of the economic deceleration in emerging markets, particularly in China. The company said most of its revenue shortfall relative to guidance, and over 100% of year-over-year worldwide revenue decline, occurred in China across the iPhone, Mac and iPad products.Russ Mould, investment director at AJ Bell, said the update from Apple spooked investors. "The consumer electronics giant's struggles are tied in closely with market fears about trade wars and the health of the Chinese economy, with a weak revenue performance in the last three months of 2018 blamed on the Greater China region."Mould noted that London-listed miners and other companies heavily reliant on Chinese consumption were struggling on Thursday. Mining stocks BHP and Glencore were down 1.6% and 1.3%, respectively, while Burberry was the worst performer in the FTSE 100, sinking 4.7%. The trench coat maker's fall came despite an upbeat session for UK retailers after Next reported a steady performance over the festive trading period. Next, the first London-listed retailer to reveal its performance for the important festive trading period, said strong sales in the three weeks prior to Christmas, along with a good half-term holiday week at the end of October, made up for disappointing sales in November. For the period from October 28 to December 29, Next recorded full-price sales growth of 1.0% on the year-earlier period, with online sales rising 15% and retail sales declining 9.2%. Total full-price sales including interest income for the period grew 1.5% on the prior year, in line with the company's September guidance.Though sales were in line, lower margin products and increased online trading meant Next nudged its pretax profit outlook for the year ending late January lower to GBP723 million, down 0.6% from previous guidance of GBP727 million.Clothing, food and homewares retailer Marks & Spencer was up 1.6% at midday, as were shares in Associated British Foods, parent of low-cost fashion chain Primark.Elsewhere on the London Stock Exchange, Vectura shares rose 13% after the respiratory disease-focused pharmaceutical firm said it expects earnings for 2018 to be above market expectations, while revenue is set to be in line.Vectura expects adjusted earnings before interest, taxes, depreciation and amortisation above consensus expectations, due to margin improvements, productivity initiatives and overall revenue mix.Research and development investment for 2018 is expected in the range of GBP55 million to GBP65 million, while guidance for 2019 has been kept at GBP45 million to GBP55 million.In economic data on Thursday, figures showed the UK construction sector expanded at the slowest rate in three months at the end of 2018, though it remained in growth territory for the ninth consecutive month. The IHS Markit/CIPS Purchasing Managers' Index came in at 52.8 in December, down from 53.4 in November and slightly below consensus forecasts of 52.9. The score remained above the neutral mark of 50, which separates expansion from contraction. Markit said UK construction firms indicated a disappointing end to the year as business activity growth eased to a three-month low and new orders expanded at a relatively muted pace. The slowdown in construction growth mainly reflected softer rises in commercial and housing activity during December, said Markit. However, a bright spot was civil engineering activity, which rose at the fastest pace since May 2017.The pound was quoted at USD1.2561 at midday, down from USD1.2591 late Wednesday.To come in Thursday's economic calendar, private payroll processor ADP releases US employment change figures for November at 1315 GMT, a precursor to Friday's monthly nonfarm payrolls report.