MARKET COMMENT: FTSE 100 Ends Week Lower Amid Corporate Concerns

LONDON (Alliance News) - London's main stock indices ended lower for second consecutive session Friday, with food retailers hit by news that a regulator is to be given new powers to impose fines, BT Group falling after it announced a new plan to close the gaping hole in its pension scheme, and International Consolidated Airlines Group down even though it got a major new investor.

The FTSE 100 closed down 0.9% on the day at 6,749.40, ending down 1.2% for the week as a whole. The FTSE 250 ended down 0.3% at 16,305.77, while the AIM All-Share index outperformed and finished up 0.6% at 690.34.

BT Group reported a strong increase in third-quarter pretax profit that beat analysts' expectations, but saw its shares drop as it agreed a 16-year recovery plan to plug its pension scheme deficit, including pumping in GBP2.0 billion over the next three years.

The telecommunications company, which is in talks to acquire the UK's largest mobile network EE, said it is making good progress on due diligence, but declined to give any further updates on the takeover. It also declined to give details on its bidding stance for the upcoming Premier League football TV rights, other than to say it is determined not to overpay.

That left questions over its future cost base, and its shares ended down 2.6% at 417.90 pence.

"The looming costs of bidding for football rights, acquiring EE Ltd and having to pump a further GBP2 billion into the company’s pension fund have dominated traders thinking," IG Market analyst Alastair McCaig said.

IAG, the owner of British Airways and Spanish airlines Iberia and Vueling, was the worst performer in the blue-chip index, ending down 3.4% at 545.013p.

The airline said state-owned Qatar Airways has acquired a 9.99% stake in the company, a move that strengthens and formalises the ties between the two carriers and continues the recent consolidation in the sector.

No financial details were given on the acquisition of the stake, but based on IAG's closing share price on Thursday of 564.00 pence a share, the stake would be worth nearly GBP1.2 billion.

Qatar Airways said it may consider increasing its stake in IAG over time, but does not currently intend it to exceed the 9.99% level. It is bound by European Union airline ownership rules that state EU airlines must be majority owned by EU shareholders. Overall non-EU ownership of any EU airline is therefore capped.

“IAG represents an excellent opportunity to further develop our Westwards strategy. Having joined the oneworld alliance it makes sense for us to work more closely together in the near term and we look forward to forging a long-term relationship,” Qatar Airways Chief Executive Akbar Al Baker said in a statement.

Food retailers J Sainsbury, WM Morrison Supermarkets and Tesco were also amongst the worst-performing stocks in the blue-chip index, down 3.3%, 2.7%, and 1.0%, respectively. The falls come after UK Business Secretary Vince Cable on Thursday tabled measures in Parliament which will give the Groceries Code Adjudicator powers to fine supermarkets in the UK that breach the Groceries Code in their relationships with their suppliers.

Fresnillo, closing up 4.2% at 899.00p, Randgold Resources, up 4.9% at 5,685.00p, Anglo American, up 1.4% at 1,113.00p, BHP Billiton, up 2.1% at 1,443.00p, and Rio Tinto, up 1.7% at 2,935.67p, were lifted by improved metals prices. The gold price rose 1.2% to USD1,276.65 an ounce.

In the FTSE 250, Afren ended as the best performer, closing up 26.2%, after SEPLAT Petroleum Development Co was given another extension to the deadline by which it must state its intention to make a firm takeover offer for Afren or walk away. It now has until close of trade on February 13 to make an offer, as talks continue.

Afren's rise comes after a period of sustained weakness for the oil and gas explorer. Its shares are down by approximately 20% since the end of last week, and around 88% since the beginning of 2015.

AIM All-Share-listed Weatherly International shares rose 85% to end as the best performer in the index. The miner said that progress at its Tschudi copper mining project in Namibia is ahead of schedule, with first copper forecast to be produced in February 2015.

In Europe, the CAC 40 in Paris ended down 0.6% while the DAX 30 in Frankfurt ended down 0.4%.

Consumer prices decreased in the eurozone for the second straight month in January and marked the biggest fall since 2009. The harmonized index of consumer prices fell 0.6% year-on-year in January - a similar rate of decline was last seen in July 2009. This was the second consecutive fall in prices and exceeded a 0.5% drop forecast by economists. Prices were down 0.2% in December, which was the first decline since October 2009.

In the US, data released by the federal Bureau of Economic Analysis said the economy grew at an annualized pace of 2.6% in the quarter ending December 2014. The expansion was slower than the previous quarter, when the economy grew at a pace of 5%, according to the bureau's final estimate in December. Fourth-quarter growth fell short of Wall Street expectations, which were at a median forecast of 3%, according to Bloomberg news survey of 85 economists.

In US corporate news, Amazon.com reported above-consensus earnings for its fourth quarter but its revenue missed estimates, while the company's first quarter sales guidance was also deemed to be weak. Google reported fourth quarter earnings and revenue that were below estimates amid a drop in online ad rates.

Chevron Corp became the latest oil major to cut capital spending in response to the fall in oil prices, saying spending in 2015 will be 13% than its total investments in 2015. The company reported a 30% decline in profit for the fourth quarter from last year, as strong earnings at its refining segment were more than offset by lower revenue and flat production amid the sharp decline in crude oil prices. However, both earnings per share and quarterly revenues topped analysts' expectations.

When London's equity markets closed, the main US stock indices were lower with the DJIA and S&P500 both trading down 0.7%, and the Nasdaq Composite down 0.4%.

In the UK corporate calendar, RM will release full year results on Monday.

In the economic calendar, there are HSBC and Markit Manufacturing PMIs due from China, Russia, Italy, France, Germany, the UK and US.

By Daniel Ruiz; danielruiz@alliancenews.com

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