LONDON MARKET MIDDAY: Commodity Sector Rout Weighs On Stocks

LONDON (Alliance News) - UK stocks were trading lower midday Thursday, hampered by falls in resource stocks as commodity prices weakened on the back of a stronger dollar.

"In the mining sector, the picture continues to look unappetising. The modest recovery in the US dollar has hit commodities across the board," said Chris Beauchamp, senior market analyst at IG.

Copper miner Antofagasta was the biggest FTSE 100, down 6.3%, having also been downgraded by Canaccord to Hold from Buy. Anglo American was down 2.8% and BHP Billiton was down 2.9%.

The stronger dollar meant that oil prices receded from their new 2016 highs early Thursday. Brent oil touched a high of USD52.83 a barrel, and at midday traded at USD51.87. This was now lower than the USD52.18 seen at the London stock market close on Wednesday.

The blue-chip FTSE 100 index traded down 0.9%, or 53.46 points, at 6,248.06. The FTSE 250 was down 0.5% at 17,093.68 and the AIM All-Share was flat at 744.89.

In Europe, the CAC 40 in Paris was down 0.9% and the DAX 30 in Frankfurt was down 1.3%.

This followed losses in Tokyo where the Nikkei 225 index closed down 1.0% after weak Japanese machine orders data. The Shanghai and the Hong Kong markets were closed Thursday for the Dragon Boat Festival in China. The Shanghai market also will be closed on Friday.

Ahead of the open on Wall Street, futures pointed the Dow 30 and Nasdaq 100 both down 0.3% and the S&P 500 down 0.4%.

Vodafone was amongst the worst performers in the FTSE 100, down 4.2%. The stock went ex-dividend Thursday, meaning new buyers no longer qualified for the latest dividend payment.

Vodafone also said it struck a deal with New Zealand's Sky Network Television to form a new venture in the country through a combination with its Vodafone New Zealand unit.

Sky Network is a pay television provider in New Zealand, established in 1987 and with over 830,000 subscribers. It has no connection to London-listed Sky. Sky-founder Rupert Murdoch's News Corp held a 44% stake in Sky Network for a time, but this was sold in 2013.

Vodafone New Zealand has been operating in the country since 1998 and had over 2.35 million mobile and 500,000 fixed line connections as at the end of March 2016.

Sky Network will buy all the shares in Vodafone New Zealand for a total NZD3.44 billion, equivalent to GBP1.69 billion at current exchange rates, and the issue of new shares in Sky Network to Vodafone Europe, giving Vodafone a 51% stake in the business. The remaining cash consideration of NZD1.25 billion will be funded through new debt.

Other stocks which had gone ex-dividend were platinum and chemicals company Johnson Matthey, down 3.3%, and media buying agency WPP, down 1.2%.

In the FTSE 250, Essentra was by far the worst performer, down 30% after the plastic and fibre products company issued a profit warning for 2016 following a deteriorating in trading in its filter products business.

Essentra said it is "unlikely" to meet the trading expectations for the year to the end of December that it had set out in its annual results in February.

Its Filter Products unit, which makes filters for cigarettes, has been hit by a challenging market backdrop and projects either no being commercialised or being delayed.

Due to this, and short-term operational issues in its Health & Personal Care Packaging division, Essentra said its total revenue for 2016 will be broadly flat on the GBP1.10 billion posted a year earlier.

RPC Group was having a better day, trading up 3.0%. The plastic products company struck a deal to beef up operations with the acquisition of fellow London-listed firm British Polythene Industries, the latest in a slew of deals made by RPC.

RPC will pay 470.00 pence per share in cash and 0.60141 of new RPC shares for British Polythene, a polythene films producer, valuing the group at a total of GBP261.0 million.

The total per share value of the deal will be around 940.00p per British Polythene share, a 30% premium to the stock's closing price of 725.00p per share on Wednesday, which had given the company a market capitalisation of GBP198.9 million. British Polythene shares traded up 34% at 970.00p midday Thursday.

Contract logistics operator Wincanton, up 7.7%, reinstated its dividend for the financial year to the end of March following growth in profit and revenue, and as the group substantially completed its restructuring.

Wincanton said it will pay a 5.5 pence dividend for the year, having not paid a dividend the year before as it undertook a restructuring and booked charges on unprofitable contracts. The group said it intends to institute a progressive dividend policy from here on, with annual payout growth to be broadly matched to underlying earnings growth.

A major part of Wincanton's restructuring was completed over the course of the year, with the GBP60.0 million sale of its records management business to UK-listed office services provider Restore. Funds from the sale were used to repay debt and make a contribution to the group's pension scheme.

In UK economic news, the visible trade deficit narrowed slightly in April, data from the Office for National Statistics showed. The deficit on trade in goods decreased to GBP10.5 billion from GBP10.6 billion in March versus forecasts to widen to GBP11 billion.

The EU visible trade deficit increased to GBP7.9 billion from GBP7.8 billion, while the non-EU deficit narrowed to GBP2.6 billion from GBP2.9 billion.

Still ahead in the economic calendar, US initial and continuing jobless claims are at 1330 BST, while wholesale inventories are due at 1500 BST.

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

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