LONDON MARKET OPEN: Morrisons Interims Sink Supermarket Shares

LONDON (Alliance News) - UK stocks opened lower Thursday following a weak close on Wall Street Wednesday and poor producer prices data from China, while Wm Morrison Supermarkets was one of the worst performers in the FTSE 100 after another poor set of results.

The grocer reported a sharp drop in profit in the first half of its financial year, as its revenue and like-for-like sales continued to decline in a deflationary UK food market and as it competes on price with other supermarkets in the face of discounters Aldi and Lidl.

Morrisons posted a drop in pretax profit in the half year ended August 2 to GBP126 million from GBP239 million in the first half of the prior year, as total revenue fell 5.1% to GBP8.1 billion from GBP8.5 billion, and like-for-like sales excluding fuel declined 2.7%. It said that its like-for-like sales continue to be hit by deflation as it continues to lower prices.

Morrisons traded down 3.5%, while fellow blue-chip grocers Tesco and J Sainsbury were down 2.1% and 1.2% respectively.

Next was the biggest of a handful of FTSE 100 gainers. The fashion retailer traded up 2.4% after it said its pretax profit and revenue both rose in the first half of its financial year, driven by higher-than-expected full-price brand sales growth and a robust performance in its directory business, while retail sales rose only marginally.

The company said its pretax profit for the 26 weeks to July 25 was GBP347.1 million, up from GBP324.2 million, as its total sales revenue for the period rose to GBP1.89 billion from GBP1.85 billion a year earlier.

Dixons Carphone also was bucking the market trend and traded up 2.2%. The electricals retailer said its like-for-like sales grew in the first quarter, driven by a strong performance in the UK and Ireland which offset mixed conditions in Southern Europe.

The company, created by the merger of Dixons Retail and Carphone Warehouse last year, said its group like-for-like revenue growth in the 13 weeks to August 1 was 8%, driven by 10% growth in the UK and Ireland.

UK house prices logged its biggest monthly increase in 15 months, data from Lloyds Banking Group's Halifax division revealed. House prices advanced 2.7% in August from July, which was the fastest monthly increase since May 2014. Economists had forecast prices to climb 0.5% after falling 0.4% in July.

The surprisingly strong reading lifted the shares of housebuilders. Barratt Developments was up 1.5%, Taylor Wimpey up 1.2% and Persimmon up 0.6%.

In the AIM All-Share index, Herencia Resources was the worst performer, down 21% at 0.099 pence. The company said it has completed a placing to raise GBP500,000 through the issue of 512 million new shares at 0.1 pence per share.

Herencia owns a portfolio of exploration properties in Chile, South America. It plans to use the funds raised for a number of its initiatives, including advancing its Picachos Project, finishing due diligence and negotiations on a potential Tambillos joint venture and for general working capital.

Haydale Graphene Industries was up 8.8% after it said its composites arm, Haydale Composite Solutions, has signed a letter of intent with Swiss-based epoxy, acrylic and polyurethane-based polymer products company Huntsman Advanced Materials (Switzerland), a unit of US-based Huntsman Advanced Materials.

The letter of intent is the first step towards the company inking a joint development and commercialisation agreement with Huntsman, it said. No financial details were disclosed.

The FTSE 100 index traded down 0.9% at 6,172.49, the FTSE 250 was down 0.6% at 17,057.95 and the AIM All-Share was down 0.3% at 734.44

In Europe, the French CAC 40 index was down 0.9% and the German DAX 30 was down 0.8%.

Having opened higher, US equities ended the session in the red after a strong JOLTS job openings report saw increased speculation in favour of a September US interest rate hike. The Dow closed down 1.5%, the S&P 500 ended down 1.4% and the Nasdaq Composite closed down 1.2%.

The US Bureau of Labor Statistics reported Wednesday that job openings in July rose to 5.8 million from the 5.3 million seen in June and surpassing expectations of a 5.3 million increase. The Bureau said this was the highest since the series began in December 2000, beating the prior high of 5.4 million in May.

Stocks in Asia were also lower Thursday. The Nikkei in Japan closed down 2.5%, the Hang Seng was down 2.15, and the Shanghai Composite was down 1.4%.

Consumer inflation in China reached its highest point for a year, driven by the cost of pork and other food, while producer prices dropped sharply, officials said Thursday. The divergence complicates matters for China's wavering economy, experts said.

The consumer price index was up 2% year-on-year in August, while the producer price index was down 5.9%, the biggest drop in more than five years, the National Bureau of Statistics said. Both shifts were greater than predicted. Analysts had forecast a 1.8% rise in consumer prices, up from a year-on-year inflation of 1.6% in July, and a 5.5% drop in producer prices, compared with 5.4% year-on-year the previous month.

Meanwhile, at the World Economic Forum's event in Dalian, known as the Summer Davos, Chinese Premier Li Keqiang promised to relax restrictions on foreign capital in financial markets and said the country would meet its economic targets.

Focus will shift to the Bank of England's interest rate decision and minutes which will be simultaneously released at midday.

Analysts overwhelmingly expect the UK central bank to maintain interest rates at their record low of 0.5% and asset purchases at GBP375 billion. The minutes from the meeting are expected to show that only one member of the Monetary Policy Committee, Ian McCafferty, voted for a rate hike, matching the vote split seen in the August minutes.

Elsewhere in the economic calendar, there are US initial and continuing jobless claims at 1330 BST, alongside import and export price index. At 1600 BST there is Energy Information Administration crude oil stocks.

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

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