LONDON MARKET OPEN: Builders' Merchants Hit By Tough Market

LONDON (Alliance News) - UK stocks were trading mostly in the red early Thursday, with Travis Perkins the biggest blue-chip faller after it said its 2015 earnings are set to come in at the low end of market expectations due to continued challenges in its key markets in the third quarter.

The blue-chip builders' merchant and home improvement retailer, which traded down 5.9%, said that despite planning for a reduction in repair, maintenance and improvement markets over the summer months, the actual slowdown in the market was worse than had originally been expected.

Despite continuing to outperform a weak UK market, the tougher-than-expected conditions mean the group now anticipates its full-year 2015 earnings before interest and taxation will be at the low end of market expectations.

For the third quarter to the end of September, Travis Perkins posted total sales growth of 5.5%, with like-for-like sales growth of 2.6%.

Fellow building-products company SIG shares were the biggest faller in the FTSE 250, down 21%. It said its sales performance has diverged in the first nine months between its UK and European operations and said continued weakness in the latter, plus some softness in the UK repair, maintenance and improvement market, mean it now expects its underlying pretax profit to fall year-on-year.

SIG said it now expects its underlying pretax profit for the year to the end of December to be GBP85 million to GBP90 million, compared to GBP98.1 million in 2014. The underlying figures strip out any exceptional items and the effects of acquisitions and disposals.

Other building materials companies were hit by the comments by their two peers, with Marshalls down 6.1%, Grafton Group, down 4.9% and Howden Joinery Group down 2.7%.

The FTSE 100 index traded down 0.1% at 6,345.27 points, the FTSE 250 was down 0.3% at 16,980.04 while the AIM All-Share index was up 0.1% at 745.27.

European shares were mixed, with the CAC 40 index in Paris down 0.1% and the DAX 30 in Frankfurt up 0.1%.

Asian equities also were mixed. The Japanese Nikkei 225 index ended down 0.6% and the Hang Seng was down 0.8%. The Shanghai Composite reversed early losses to trade up 1.5%.

Anglo American was another big faller in London, down 3.9%. The miner reported quarter-on-quarter falls in production across most of its commodities and cut its production guidance across several divisions.

Anglo reported a 12% quarter-on-quarter fall in iron ore production from its Kumba project in the third quarter to end September to 11.4 million tonnes from 13.0 million tonnes, pushing year-to-date production to 33.9 million tonnes compared to 35.8 million tonnes a year earlier.

However, Anglo lowered its full-year 2015 guidance for the Kumba mine to 43.0 million tonnes from its previous guidance of 44.0 million tonnes.

The company also made small downward revisions to its full-year guidance for the Shishen mine to 31.0 million tonnes from its original guidance of 33.0 million tonnes, whilst upping its guidance for the Kolomela mine to 12.0 million tonnes from 11.0 million tonnes.

Pearson continued its run of losses after the education and publishing company on Wednesday cut its earnings expectations following of a series of asset disposals, compounded by "challenging" market conditions and currency movements, igniting concerns that the worst is not over for the group. The company closed down 16% on Wednesday and after receiving downgrades by JP Morgan and Bank of America Merrill Lynch traded down 2.8% early Thursday.

It was a busy morning among midcap stocks. Ladbrokes led the gainers, up 3.7%, despite saying group net revenue fell in the third quarter of 2015 as it faced a tough comparative period, and it reported a decline in earnings due to increased games duty and taxes.

The betting company reported a 0.7% fall in group net revenue in the three months ended September 30, but said this would have grown 2.0% excluding the FIFA World Cup which took place in the comparative period last year.

Debenhams reported growth in profit in its recently-ended financial year as it announced that Chief Executive Michael Sharp will step down from his role in 2016.

The department store operator reported a 7.3% rise in pretax profit in the year ended August 29 to GBP113.5 million from GBP105.8 million the year before, in line with market expectations. It said this was down to good progress made against its strategic priorities, including cutting down on promotions and tightly controlling stock, which led to a 90 basis points improvement in gross margin rate.

The company's shares traded up 3.4%.

Foxtons Group traded down 5.2% after it reported an increase in customer activity in the third quarter in some areas of its property sales, but said the market is taking time to recover following the slowdown around the General Election. Foxtons said the slowdown has particularly hit the central London market, where transactions remain at historically low levels due to strong recent price growth and changes to the stamp duty regime.

The focus in the economic calendar is the European Central Bank's monetary policy decision at 1245 BST, followed by a press conference with President Mario Draghi at 1330 BST in Malta. The central bank is largely expected to leave interest rates on hold but to open the door to further monetary action amid the threat of deflation and a slowdown in major emerging economies.

Last month's 0.1% fall in annual eurozone inflation along with cooling growth in economies such as China, Brazil and Russia has increased the pressure on the ECB to extend its EUR60 billion a month bond-buying plan under its quantitative easing programme.

However, analysts expect the bank will decide to keep its benchmark refinancing on hold at a historic low of 0.05% following its two-day meeting in the island state of Malta.

Elsewhere in the economic calendar, UK retail sales are at 0930 BST, and US continuing and initial jobless claims are at 1330 BST. At 1500 BST there are US existing home sales and housing price index along with US Conference Board leading indicator and eurozone consumer confidence.

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

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