MARKET COMMENT: FTSE 100 Drops Further Away From 7,000 Mark

LONDON (Alliance News) - The FTSE 100 slipped further from the 7,000 point mark Tuesday, falling for a third consecutive day as investors focused on a large number of corporate earnings that included lower profits from both Barclays and mining and commodities trading giant Glencore.

The FTSE 100 ended down 0.7% at 6,899.13, the FTSE 250 down 0.6% at 17,146.02, and the AIM All-Share index closed 0.6% lower at 709.15.

London's blue-chip index had hit an all-time intraday high of 6,974.26 on Monday, even though it closed lower, and 7,000 is seen as the next key psychological threshold for the index.

Equities also dropped in continental Europe and the US, with the French CAC 40 ending down 1.0% and the German DAX 30 down 1.1%. When the European equity markets closed, the DJIA was down 0.6%, the S&P 500 was down 0.7%, and the Nasdaq Composite was down 0.8%, falling below the 5,000 mark.

Barclays was one of the worst performing stocks in the FTSE 100, closing down 2.3%, as its 2014 pretax profit fell to GBP2.26 billion from GBP2.87 billion, hit by a steep fall in income from the investment bank it is in the process of shrinking, and as it booked more provisions for insurance mis-sold to customers in the UK, a provision over alleged foreign exchange manipulation, and a technical change in the valuation of a portfolio of loans.

On the positive side, earnings in its personal and corporate banking business and its Barclaycard credit card business rose, and it cut adjusted operating expenses by 9% to GBP18.07 billion.

Its adjusted pretax profit, which strips out some of the provisions, the loan portfolio revaluation and a loss on the sale of its Spanish business rose to GBP5.50 billion, from GBP4.91 billion, beating analysts' expectations, but that wasn't enough to offset the disappointment over the new provisions.

Travis Perkins, down 4.0%, was also amongst the worst performers in the FTSE 100. The building merchants reported higher pretax profit and revenue for 2014 as the continued recovery in the UK housing market drove good revenue growth in its general merchanting and contracts divisions, although profit growth was held back partly by restructuring costs for its plumbing and heating business. It reported a pretax profit of GBP321.4 million for 2014, up from GBP312.6 million in 2013, even though revenue grew strongly to GBP5.58 billion from GBP5.15 billion.

Glencore closed down 3.1% as the metals and mining giant joined sector peers in slashing its capital expenditure plans, after it reported lower 2014 profits hit by the fall in the oil price and prices for other commodities. It said its capital expenditure fell to USD8.57 billion in 2014, from a pro-forma USD1132 billion in 2013, and it now expects total industrial capital expenditure for 2015 to be between USD6.5 billion and USD6.8 billion, down from its previous guidance of USD7.9 billion.

Glencore reported a closely watched adjusted earnings before interest, tax, depreciation and amortisation of USD12.76 billion for 2014, down from a pro-forma USD13.07 billion in 2013, while net profit fell to USD2.31 billion, from USD2.47 billion.

Taylor Wimpey was one of the best performers in the FTSE 100, up 2.1%. The home builder joined sector peers in reporting strong growth in 2014 profits driven by higher home completions at higher average selling prices, and it was also positive about its outlook saying the so-called "spring selling season" has got off to a better start than it had expected.

In the FTSE 250, Pace, the maker of products such as set-top boxes for pay-TV and broadband, was the best-performing stock, rising 8.1%. The company expressed confidence in making "further progress" in 2015, saying it expects earnings to rise, as it posted a increase in pretax profit for 2014. It also proposed a final dividend of 4.75 cents per share, taking its total dividend to 7.00 cents, up 27.5% from 5.49 cents in 2013.

James Fisher & Sons closed up 7.8%, the second-best performer in the mid-cap index. The marine services company reported a rise in pretax profit and revenue in 2014 and increased its dividend by 10% on the back of a solid performance across its business. It also struck a deal to buy a South African marine services company. It said its pretax profit ticked up to GBP49.2 million, from GBP46.2 million in 2013, as revenue rose to GBP444.8 million from GBP413.7 million.

Rotork was another big gainer in the FTSE 250, up 6.3%. The manufacturing company said its pretax profit rose in 2014 as revenue was buoyed by strong sales in the power market, and it said that growth in other sectors would help offset the challenging energy markets it is expecting in the current year. It said its pretax profit for the year was GBP141.2 million, up from GBP138 million in 2013, as revenue rose to GBP594.7 million from GBP578.4 million on the back of a 16% increase in sales to the power market.

MoneySupermarket.com Group was the biggest faller in the FTSE 250, ending down 9.0%, despite reporting a big rise in pretax profit for 2014 as swelling revenue significantly outpaced an increase in costs. The company also said trading has started well in 2015 although it may suffer in the second quarter against tough comparatives. Analysts said they are worried about the potential impact of the House of Commons energy and climate change committee's report on the former industry practice of not displaying non-commission paying deals to customers by default.

ISG was amongst the biggest fallers in the AIM All-Share index, closing down 27%. The construction services and fit-out company said it swung to a loss in the first half of its financial year owing to issues with contracts secured in the past and said it will raise GBP16 million in a discounted share placing. ISG said its pretax loss for the six months to the end of December was GBP15.6 million, compared with a GBP4.6 million profit a year earlier.

The pound rose against other major currencies on the back of a better-than-expected UK construction Purchasing Managers' Index reading. Data from Markit showed that construction PMI rose to 60.1 in February from 59.1 in January. It was forecast to fall to 59. The score was above the neutral 50 threshold for the twenty-second straight month. At the close of London equity trade, sterling traded at USD1.5370.

In the economic calendar Wednesday, there is HSBC China Services PMI for February at 0145 GMT, before Markit Services and Composite PMI from France at 0850 GMT, Germany at 0855 GMT, the eurozone at 0930 GMT, and the US at 1445 GMT. Markit Services PMI for the UK will be at 0930 GMT. Eurozone retail sales is at 1000 GMT and US ISM non-manufacturing PMI is at 1500 GMT.

In another busy corporate calendar, there are full-year results expected from FTSE 100 constituents Fresnillo, ITV, and Legal & General. Standard Chartered will be report its full-year earnings at 0815 GMT. From FTSE 250-listed companies, London-focused commercial property company CLS Holdings, aviation services firm BBA Aviation, construction company Carillion, funeral services company Dignity, engineering investment group Melrose Industries, and bakery chain Greggs will all be reporting full-year results. International Consolidated Airlines Group will report February traffic results.

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

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