MARKET COMMENT: UK Stocks End Lower In Quiet Start To Busy Week

LONDON (Alliance News) - UK stocks made a soft start to the week Monday, with investors focused on individual company updates, leaving indices trading in a tight range for most of the day amid dearth of overall market drivers.

The FTSE 100 has closed fractionally lower at 6,788.07, the FTSE 250 has closed down 0.5% at 15,616.53, and the AIM All-Share down 0.2% at 771.69.

Afternoon press reports that EU leaders may be close to agreeing sector-wide, or "tier-three", sanctions against Russia for its part in the downing of Malaysian Airlines flight MH17 send equity markets across Europe to session lows, but investors were broadly reluctant to take significant positions ahead of some bigger economic and corporate updates to come later in the week, including the the Federal Reserve policy meeting and the monthly US jobs report.

Within European majors, the German DAX 30 ended down 0.5%, while the French CAC 40 closed up 0.3%.

After the European market close, US stocks are continuing lower, with the DJIA down 0.2%, the S&P 500 down 0.2%, and the Nasdaq Composite down 0.4%.

"I think there's very little enthusiasm to get overly long equities ahead of this week's US data and that's lent a slight negative bias to proceedings today," said CMC Markets chief market analyst Michael Hewson.

In London, Reckitt Benckiser was the best FTSE 100 performer, closing up 3.0% after reporting strong first half results and saying it plans to spin-off its US-based pharmaceutical business within the next 12 months. The consumer goods company reported first half profit of GBP1.04 billion, up from GBP898 million in the first half of last year. Analysts say the results were driven by a better-than-expected performance from the pharmaceutical business, which bodes well for the the plans for it to de-merge and list in the UK in its own right.

Ryanair shares gained 2.6% after reporting first quarter results ahead of consensus forecasts. The Irish-listed low-cost airline said that in its first quarter to June 30, revenue rose 11% to EUR1.50 billion from EUR1.34 billion in the comparable quarter a year earlier. Pretax profit also jumped to EUR223.6 million, compared with EUR88.5 million. Analysts in part attributed the strong performance to the timing of Easter, which fell entirely in the first quarter this year, compared to last year when it was split between the fourth quarter and the first quarter.

EasyJet shares enjoyed a small read across, closing up 0.9%.

Aberdeen Asset Management weighed on the other end of the FTSE 100, ending down 5.4% after saying its assets under management fell by 0.6% in its third quarter, hit by a GBP4.0 billion withdrawal by a single client, as well as worse-than-expected outflows across various products. Aberdeen said its assets fell to GBP322.5 billion at the end of June from GBP324.5 billion at the end of March. Management said that most of the lost assets were low margin, but even so analysts expect consensus forecasts to be downgraded by between 2% to 4% as a result of the lost business.

Royal Bank of Scotland saw a little profit taking in its shares following their 11% rise on Friday when the bank surprised the market with an unscheduled release of unexpectedly strong results. RBS closed down 3.3% Monday.

Lloyds shares remained little changed despite being hit with a GBP218 million fine from US and UK authorities for its part in the manipulation of the LIBOR and Sterling Repo Rate, making it the latest in a long list of financial institutions to have agreed settlements over past misconduct in relation to benchmarks. Lloyds shares took the fine in their stride, closing just fractionally higher Monday.

A broadly positive US second-quarter earnings season has been providing support to equity valuations in recent sessions, and following a lull in proceedings Monday they are set to come back into focus Tuesday, with the release of results from big names including Pfizer and Twitter, while the UK earnings season also builds to a peak.

Full-year results are due Tuesday from PZ Cussons, while interim results are due from Domino's Pizza, Drax Group, GKN, Tullett Prebon, and St James's Place. Quarterly numbers are due from BP and Next.

The fact that about 75% of US names have beaten expectations so far has also raised expectations for the big US economic releases to come this week, starting with the consumer confidence index on Tuesday and culminating in the July non-farm payroll report on Friday.

"The match really kicks off tomorrow for markets with the release of the US consumer confidence report and results from the likes of BP and Twitter," said CMC Markets market analyst Jasper Lawler.

UK mortgage approvals data will provide the domestic economic focus Tuesday, due at 0930 BST along with other consumer credit and net lending data from the Bank of England. Ahead of that Bank of England Deputy Governor Ben Broadbent is scheduled to speak in London at 0800 BST.

By Jon Darby; jondarby@alliancenews.com; @jondarby100

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