LONDON MARKET OPEN: Share Lower As Inmarsat Losses More Altitude

LONDON (Alliance News) - Stock in London opened mostly lower, with resource stocks weighing on the FTSE 100 amid falling commodities prices, while shares in satellite communications firm Inmarsat was heavily down, extending the losses seen on Thursday.

The FTSE 100 was down 0.3%, or 17.08 points, at 6,100.17. The FTSE 250 was down 0.3% at 16,618.71, and the AIM All-Share was down up 0.1% at 722.99.

Inmarsat was the worst performing blue-chip stock, down 5.7%. The satellite business was adding to the losses seen on Thursday, when it fell 7.0%, after it revised down its 2016 revenue guidance. Inmarsat's first-quarter pretax profit declined 39%, and it said the underlying trading environment remains tough, with demand weakening in the first quarter.

InterContinental Hotels Group was down 2.2%, after saying Friday that revenue per available room fell in the first quarter of 2016, although it would have grown on a constant currency basis.

The hotel company said group RevPAR slipped by 0.7% in the first quarter year-on-year due to the strengthening of the dollar. On a constant currency basis, however, this grew by 1.5%, driven by a 1.0% increase in room rates and 0.3 percentage point rise in room occupancy.

Geographically, RevPAR at actual exchange rates grew by 0.7% in the Americas, but declined by 3.1% in Europe, by 4.6% in Africa, the Middle East and Asia, and by 1.6% in Greater China. At constant currencies, RevPAR grew by 1.9% in the Americas, by 1.4% in Europe, by 2.2% in Greater China, but still declined by 1.1% in Africa, the Middle East and Asia.

Resource stocks were among the worst blue-chip performers, with miners Glencore and Antofagasta down 2.7% and 2.1%, respectively, while oil producer BP was down 1.2% and Royal Dutch Shell 'A' shares were down 1.3%.

Brent oil was lower for a sixth consecutive session, quoted at USD44.58 a barrel soon after the London equities open, compared to USD45.72 at the close on Thursday. The North Sea benchmark reached its highest level in 2016 a week ago, at USD48.25 a barrel, but has declined since.

Similarly, gold was quoted at USD1,279.01 an ounce against USD1,276.39 on Thursday. Though the current price of the precious metal is slightly higher than late Thursday, gold has fallen for four consecutive days this week.

BHP Billiton was down 2.3%. The Anglo-Australian miner said Brazil's Federal Court of Appeal has ratified the settlement agreement it reached in March over the Samarco dam disaster.

On November 5, a tailings dam at the Samarco project in Brazil burst and flooded the local community, leading to at least 17 fatalities and to the devastation of the local area, displacing many people from the municipalities of Ouro Preto and Mariana in the state of Minas Gerais. Samarco is a joint venture between BHP and Vale, the Brazilian miner.

The pair reached an agreement in March which will cover a total settlement of BRL9.20 billion, or around USD2.30 billion, over 15 years covering the restoration of the environment and communities effected by the dam disaster. The agreement was with the Federal Attorney General of Brazil, the States of Espirito Santo and Minas Gerais and other public authorities.

In the FTSE 250, Interserve shares were taking a big hit, down 22%. The support service and construction company said its expectations for its UK construction division have been hit "significantly" by a further deterioration in its contract in Glasgow, and said it now expects net debt to come in GBP35.0 million higher than previously guided.

Interserve said it expects further cost overruns and delays in relation to its energy from waste contract in Glasgow, following issues relating to the design, procurement and installation of the gasification plant, together with continuing challenges with the supply chain.

As such, Interserve said it anticipates a GBP70.0 million exceptional contract provision to be taken in the first half of 2016, resulting in a similar level of outflow spread across 2016 and 2017. The company said it will be "pursuing every opportunity to mitigate this situation", but noted that this has pushed up its net debt expectations around GBP35.0 million higher than its previous guidance.

In Paris, the CAC 40 was down 0.9%, and the DAX 30 in Frankfurt was down 0.6%.

In Asia on Friday, the Tokyo market reopened after several days closed for holidays, with the Nikkei 225 index ending down 0.3%. In China, the Shanghai Composite fell 2.8%, while the Hang Seng index in Hong Kong is down 1.8%.

The day's main focus will be US nonfarm payrolls, due at 1330 BST, which analysts expect to decline in April from the March reading.

CMC Markets chief market analyst Michael Hewson says expectations are for 200,000 new jobs to be added in the US in April, down from 215,000 in March. The analyst expects the US unemployment rate to remain steady at 5%, "but there does appear to be an undercurrent of concern that suggests we could see a miss to the downside."

The nonfarm payrolls come after data from ADP showed on Wednesday a slowdown in US private sector jobs growth in April. ADP said the private sector added 156,000 jobs in April following an increase of 194,000 jobs in March. Economists had expected the addition of 193,000 jobs for the month.

Oanda senior market analyst Craig Erlam commented: "While this isn't historically the most accurate of estimates of today's nonfarm payrolls number, it's hard to ignore such a large miss that suggests we could be in for disappointment today."

Also in the economic calendar Friday, the Baker Hughes US oil rig count is due at 1800 BST. Full results of Thursday's UK local elections, including for mayor of London, are not expected until late Friday afternoon or evening.

By Daniel Ruiz; danielruiz@alliancenews.com

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