LONDON MARKET OPEN: Housebuilders, Banks Resume Declines After Bounce

LONDON (Alliance News) - Following a strong rebound, in which the FTSE 100 regained all of its post-referendum losses, UK equities have opened lower Thursday.

The UK's decision to leave the European Union last week has clouded the outlook for the country and initially sparked a huge sell-off in UK equities. Housebuilders and banks saw the sharpest selling in the both the blue-chip and mid-cap indices, but the sectors have been amongst the best performers in the last two trading sessions as stocks bounced back.

Nevertheless, uncertainty is still rampant as London continues to delay invoking Article 50 of the Lisbon Treaty and thereby beginning the process of Brexit, while European leaders call for more urgency.

The negotiation of the UK's exit will be key in calming market nerves, but German Chancellor Angela Merkel said the UK will not receive any special favours and the negotiations will not be a cherry-picking exercise. She said the the UK could enjoy access to the single market only if it accepted the four basic European freedoms, which include free movement of people.

On Thursday, banks and housebuilders were back amongst the worst performers in the FTSE 100, with state-backed lender Royal Bank of Scotland down 4.5%, and housebuilders Barratt Developments and Taylor Wimpey down 3.5% and 3.1% respectively.

Builders' merchant Travis Perkins was down 4.6%, after Berenberg downgraded the stock to Hold from Buy, citing Brexit uncertainty on consumer sentiment and the housing market.

The FTSE 100 index was down 0.7%, or 42.76 points, to 6,317.30. The FTSE 250 was down 0.5% at 15,916.54. However, the AIM All-Share was up 0.3% at 699.79 points.

Elsewhere in Europe, the CAC 40 in Paris was down 0.9% and the DAX 30 in Frankfurt down 1.0%.

In Asia, the Japanese Nikkei 225 index closed up 0.1%, the Shanghai Composite ended down 0.1% and the Hang Seng in Hong Kong continues up 1.0%.

In UK company news, 3i Group said it has increased the book value of its investment in Action, the Benelux-based non-food retailer, following strong trading and a number of approaches the FTSE 100-listed private equity provider has received in respect of the investment.

3i said Action has continued to grow strongly, based on trading in 2016 to mid-June, and like-for-like sales growth is set to be broadly similar to 2015. Action also is on track to open materially more stores in 2016 than in 2015.

Given the third-party interest in the business and continued growth, 3i said it has increased the book value of its investment in Action to GBP1.46 billion from GBP902.0 million at the end of March.

3i was the best performer in the FTSE 100, up 5.9%.

Jupiter Fund Management, down 5.1%, and Anglo-Australian money manager Henderson Group, down 3.7%, were amongst the worst mid-cap performers, after Barclays cut both stocks to Equal Weight from Overweight. Henderson received an additional downgrade from Jefferies to Underperform from Hold.

Support services and logistics provider Stobart Group said it remains on track to meet its medium-term goals amid solid trading in its divisions.

Stobart said it remains well-placed to navigate through the challenges resulting from the UK's vote to leave the European Union and is confident it will deliver growth under its strategy to boost its Energy, Aviation and Infrastructure businesses out to 2018. The stock traded up 12%.

The main interests in the economic calendar are German unemployment at 0855 BST, UK GDP and current account data, both at 0930 BST, the eurozone consumer price index at 1000 BST, the accounts from the last European Central Bank policy meeting at 1230 BST, and a speech by Bank of England Governor Mark Carney at 1600 BST.

Also in the calendar are Italian inflation at 1000 BST, US initial and continuing jobless claims at 1330 BST, and the Chicago purchasing managers' index at 1445 BST.

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

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