MARKET COMMENT: UK Stocks Close Mixed, FTSE 250 Extends Losses

LONDON (Alliance News) - UK stocks closed mixed Friday, with the FTSE 100 outperforming its smaller index peers, but the FTSE 250 fell sharply for a second consecutive session, and a third in total, after another busy day of reporting by its constituents.

The mid-cap index had its worst day for six months on Thursday, as some of its individual constituents posted sharp declines, and it pushed even lower Friday, falling to a 2014 low of 15,283.91.

"Since October 2011, the FTSE 250 is up 75%, contrasting with a FTSE 100 performance of 35% which suggests that FTSE 250 valuations may be broadly stretched even allowing for a recovery in the UK economy," said CMC Markets chief market analyst Michael Hewson. "This sort of out-performance is likely to invite greater scrutiny on valuations as the economy continues to recover," he added.

The FTSE 100 closed up 0.2% at 6,855.81 on Friday, and up 0.6% for the week, while the FTSE 250 closed down 1.4% at 15,397.92, and down 3.1% for the week, and the AIM All-Share index closed down 0.6% at 796.69, and down 1.2% for the week.

Europe's main indexes also turned in mixed performances. The CAC 40 in Paris closed up 0.3% on Friday, but down 0.5% for the week, while the DAX 30 in Frankfurt closed down 0.3% Friday, but up 0.5% for the week.

On Wall Street, at the close of the UK equity market, the DJIA and S&P 500 are both fractionally higher, while the NASDAQ Composite is a touch lower.

The FTSE 100 was buoyed by a strong performance by its food retailing constituents.

J Sainsbury, WM Morrison Supermarkets, and Tesco ended the day as the top three biggest gainers in the blue-chip index, closing up 2.3%, 3.8%, and 2.6%, respectively. The gains came after rival Asda reported late on Thursday that its first-quarter like-for-like sales grew 0.1%, excluding petrol.

"Ordinarily, 0.1% like-for-like sales would not be a whole much to be writing home about," said Shore Capital analyst Clive Black on Thursday. However, "within the context of a British food retailing segment where superstores are being eschewed by a significant number of customers in favour or small stores, discount outlets and online, such a performance actually merits a degree of credit to our minds," he added.

At the other end of the spectrum, Coca-Cola HBC ended the day as one of the index's biggest fallers, closing down 4.6%. Shares in the second-largest bottler of the brands of The Coca-Cola Co fell sharply after it posted a widened net loss for the first quarter.

The group said its net loss widened to EUR39.2 million, compared with EUR24.4 million last year, as it was hit by volume declines and what it said were "adverse foreign exchange movements" in the period. Net sales revenue fell 7.0% to EUR1.33 billion, from EUR1.43 billion a year earlier, as volume fell by 4.0% to 409.6 million unit cases, from 426.7 million last year.

It blamed the volume declines on the late timing of Easter, "value-accretive" volume initiatives, and country-specific issues were partially offset by continued solid growth in Russia.

Despite this, the company said its full-year expectations for the year ahead remain unchanged as it expects an improvement in the rest of the year.

TUI Travel, closing down 3.8%, was another big faller Friday. The holiday operator was hit as British tour operators began evacuating hundreds of holidaymakers from Kenya, after the Foreign Office in London said there was a high threat from terrorism in the country, including kidnapping.

Package-holiday companies Thomson and First Choice, both part of TUI Travel, said they were flying back holidaymakers as a "precautionary measure" and had cancelled all flights to Mombasa until the end of October.

In the FTSE 250, Carphone Warehouse Group closed down 3.7%. The group's shares fell sharply after it said that it has entered into exclusive talks to sell its joint venture with Virgin Media Inc, Virgin Mobile France, to Numericable Group SA for EUR325 Million.

The steep drop came after Carphone's shares fell 8.1% on Thursday after it announced the merger with Dixons Retail.

Grainger, closing up 4.2%, was one of the biggest gainers in the mid-cap index. The residential property business' shares jumped after it released first-half results which investment bank Jefferies called "breath taking".

The group posted a pretax profit of GBP49.8 million in the six months to the end of March, up from GBP11.0 a year earlier, while revenue rose to GBP190.0 million from GBP125.2 million. Its gross net asset value per share rose by 30.00 pence, or 12%, to 272.00p, in the first half, compared with 242.00p at the end of September 2013.

"This is a STRONG set of results," said Robert Duncan, an analyst at Jefferies, in a client note.

Synergy Health, closing up 1.6%, was another big riser. The firm said that it had acquired Italy's Bioster SpA and its associated companies for EUR29.0 million that would be funded out of its existing debt facilities. The acquisition is expected to be earnings enhancing in the current financial year, Synergy said, and strengthens its offering in Europe.

Meanwhile, AIM All-Share-listed LED International Holdings' shares more than halved in value Friday, closing down 52%.

The Chinese LED lighting company's shares dropped dramatically after it warned that it is yet to receive a CNY100 million investment from mainly Taiwanese investors announced in March, and it continues to experience difficult trading conditions which it said could lead to a significant reduction to shareholder value unless it secures new funds. It's the second time a potential investment in the company has been announced, but not turned up.

In the forex market, sterling rose against the dollar Friday.

"Only two days after the bank released its inflation report, the narrative of earlier-than-expected rate rises is strengthening again, lifting the pound against its US cousin," said Chris Beauchamp, a market analyst at IG.

At the UK equity market close, sterling trades at USD1.6824, EUR1.2273, JPY170.740, and CHF1.4994.

In a quiet day in the data calendar Monday, eurozone construction output data is released at 0900 GMT.

In the corporate calendar, FTSE 100-listed Babcock International Group is joined by FTSE 250-listed MITIE Group and Cranswick in releasing full-year results. Mid-caps Shaftesbury and ITE Group provide half-year results.

By James Kemp; jameskemp@alliancenews.com; @jamespkemp

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