LONDON MARKET MIDDAY: Soft Pound Supports FTSE 100 But Pearson Falls

LONDON (Alliance News) - Stock prices in London were mixed Wednesday at midday with the FTSE 100 index benefiting as the pound gave back some of the strong gains seen on Tuesday after UK Prime Minister Theresa May's speech on her Brexit plans.

But company news also came back to the fore. Shares in education publisher Pearson, facilities management firm Mitie Group, and Mr Kipling cake baker Premier Foods were down, after all issued profit warnings.

On the upside, Hikma Pharmaceuticals was rising after getting US approval for one its generic drugs, while luxury fashion retailer Burberry Group was benefiting from a good trading update.

The FTSE 100 index was up 0.1%, or 6.89 points, at 7,227.27. The FTSE 250 was 0.1% lower at 18,223.11, while the AIM All-Share was flat at 872.23.

Blue-chip Burberry was up 2.2%, the biggest FTSE 100 gainer. It reported growth in revenue in the third quarter of its financial year thanks to a big boost from the weak pound, as it said full-year profit will be in line with market expectations.

Burberry said retail revenue in the three months to December 31 grew by 22% year-on-year to GBP735.0 million. On an underlying basis at constant currencies, retail revenue rose by 4%.

Hikma was up 1.8% after the Jordanian drugmaker said its Roxane Laboratories subsidiary in the US has received approval for its sodium oxybate oral product.

Meanwhile, Pearson was down 28% after it withdrew its ambitious operating profit target for 2018 and warned on its outlook for 2017, following a slump in its North American higher-education courseware business in the final months of 2016.

The publisher group said the fourth quarter of 2016 had seen an "unprecedented decline" in its North American higher education courseware business, which includes printed text books and that Pearson said was "much weaker than expected".

In the FTSE 250, Mitie was down 6.9% after it reported further contract woes and said its underlying annual profit is set to about halve. Mitie said underlying operating profit for the year to March 31 will be between GBP60.0 million and GBP70.0 million, down from GBP128.9 million a year before.

Mitie said strains on the company's businesses have yet to abate. Since reporting a swing to loss in November, the group said its board has met to consider the trading outlook for the remainder of the year to the end of March. Its Property Management and Technical Facilities Management divisions have been hit by client deferrals and investment plan delays, meaning some work for these units will be pushed into the 2018 financial year.

Inmarsat was down 5.1% after JPMorgan downgraded the satellite communications provider to Neutral from Overweight.

Among mid-cap gainers was Ladbrokes Coral Group, up 3.7%. The newly merged bookmaker said it expects profit in 2016 to increase in line with market consensus and management expectations, despite seeing poor sporting results in the second half of December.

In the London Main Market, Premier Foods was down 15%. The firm, which also makes brands including Bisto gravy and Homepride cooking sauces, said it suffered weak sales in the third quarter of its financial year. It warned on increased input costs as a result of the weak pound, leading it to trim its trading profit expectations for the full year.

The pound was quoted at USD1.2291 compared to USD1.2416 at the London equities close on Tuesday. Sterling had sharply appreciated during UK Prime Minister May's speech on Tuesday as it offered more clarity on the UK's position and as the PM confirmed that both Houses of Parliament will vote on the final Brexit deal.

The currency barely reacted to a UK jobs report from the Office for National Statistics released Wednesday morning. The unemployment rate remained stable in three months to November and people claiming unemployment benefits declined unexpectedly.

The jobless rate came in at 4.8%, the lowest since September 2005 and matched economists' expectations. In three months to November, unemployment decreased by 52,000 from August to 1.6 million.

Average earnings including bonus increased 2.8% from previous year and earnings excluding bonus advanced 2.7%. The claimant count held steady at 2.3% in December as economists had expected. The number of people claiming unemployment related benefits decreased by 10,100 from November.

There also were consumer inflation reports from Germany and the eurozone. Inflation in Germany was 1.7% year-on-year in December, confirming the preliminary data. In November, prices had risen at a stable pace of 0.8%. On a monthly basis, consumer prices climbed 0.7% from November, when it increased by 0.1%. The figure also matched preliminary report.

Eurostat data showed eurozone inflation accelerated to 1.1% in December from 0.6% in November, still below the European Central Bank's target of 'below, but close to 2%'. Month-on-month, consumer prices gained 0.5% in December.

Core inflation that excludes energy, food, alcohol and tobacco, rose only slightly to 0.9% from 0.8% year-on-year. On a monthly basis, core inflation rose to 0.4%, reversing a decline of 0.2% in November.

The ECB publishes its monetary policy decision on Thursday at 1245 GMT.

The CAC 40 index in Paris was down 0.4%, while the DAX 30 in Frankfurt was up 0.1%.

In New York, stocks were called for a higher open, with the Dow 30 and S&P 500 indices both seen up 0.1%, while the Nasdaq Composite was pointed up 0.2%.

In the US economic calendar, MBA mortgage applications are at 1200 GMT, consumer inflation is at 1330 GMT and industrial production is at 1415 GMT. US Federal Reserve Chair Janet Yellen will speak in San Francisco at 2000 GMT, and the API weekly crude oil stocks are at 2130 GMT.

By Daniel Ruiz; danielruiz@alliancenews.com

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