London close: FTSE ends down for January as housebuilders and Capita drag
London stocks extended their losses on Wednesday, finishing down for the month amid weakness in the housebuilding sector and wider sector concerns sparked by a profit warning from business services outsourcer Capita.
The FTSE 100 gave up 54.4 points or 0.7% to finish on 7,533.55, meaning the London blue chip benchmark gave up its record mid-month highs to lose 60 points or 0.79% over the month of January.
The rising pound has been one of the chief reasons, with sterling adding 0.38% against the dollar to 1.4195 on Wednesday and recovering from an earlier 0.4% deficit versus the euro to make a small late gain at 1.1419 despite further gloomy Brexit reports and mixed eurozone data.
"In London the initial rally was given up without much of a fight, and again one of the chief culprits is sterling strength," said Chris Beauchamp, chief market analyst at IG. "Almost half the rally from the December lows of 7300 has been given back, and while the selling may continue for a few days more, there are bound to be more than a few bargain hunters sniffing around the index."
"While the Fed meeting tonight is not expected to provide much in the way of surprises, the busy calendar from tonight until Friday means that most investors have little reason to chase the dip in US equities. Better to wait until the storm of activity, which also includes earnings from the tech giants, has passed over."
Analyst Connor Campbell at Spreadex said there were a few reasons for the FTSE’s woes, including Capita’s Carillion-esque collapse sparking wider concern about the outsourcing sector; the housebuilders have baulked at reports that the government will push forward with a "use it or lose it" approach to land banking later in the year; as well as the higher pound.
There was also a dent to sentiment in the City of London after reports that lobbying efforts to the EU to allow the sector to retain financial passporting rights post-Brexit were coming to nought. On Wednesday several diplomats continued to brief that these rights would end on Brexit day in 2019.
Market participants were also mulling over a consumer sentiment survey released overnight. GfK’s consumer confidence index rose four points to -9 in January, beating expectations for the reading to be unchanged at -13.
Joe Staton, head of market dynamics at GfK, said: “Having survived Christmas, New Year, the January Sales and Blue Monday, bullish Brits report a more upbeat view of their financial prospects for 2018 this month. From expectations for their personal financial situation to the outlook for the UK economy and major purchase index, we are reporting a rebound in levels of optimism across the board after two years of the overall index score sitting at zero or in negative territory."
The market's main focus of the day will come after the UK exchange closes, when the Fed makes it rate announcement at 1900 GMT. Although the meeting itself isn’t expected to contain many surprises, it will be Janet Yellen’s last as Chair as she passes the baton to Jerome Powell. Markets are currently pricing more than 90% probability of another 25 basis point hike at the March meeting.
Looking at individual stocks, housebuilders Persimmon, Barratt Developments, Taylor Wimpey and Berkeley Group were all firmly in the red following a report in The Times that property developers are set to lose planning permission on unused land if they fail to hit construction targets under moves to kickstart housebuilding.
Their fall was put in the shade as Capita tumbled more than 47% after it announced it would carry out a rights issue this year, was shelving its dividend plans and warned over its 2018 profit. Peers Mitie and Serco both lost ground.
Marks & Spencer was lower after it announced plans to close another eight stores in a move that will affect 468 jobs.
FTSE 250 soft drinks maker Britvic was in the red after it said first-quarter revenue rose 3.3%, although on an organic basis excluding the acquisition of Bela Ischia, it was up a more modest 0.7%. The group also highlighted uncertainty from the introduction of the soft drinks levy.
Budget airline Wizz Air flew lower as it net profit guidance of between €265m and €280m for 2018 fell short of analysts’ expectations.
On the upside, Johnson Matthey was the standout gainer after announcing that Cummins was buying its UK automotive battery systems business, a subsidiary specialising in high-voltage automotive grade battery systems for electric and hybrid vehicles. As part of the acquisition, Cummins and Johnson Matthey also agreed to collaborate on the development of high energy battery materials for commercial heavy duty applications.
SSE rallied as it upgraded its estimate for annual earnings and reported progress in delivery of operations and returns from long-term investments.
Rolls-Royce was revved up after luring Tom Bell back from Boeing to lead its enlarged defence business in a further shake-up at the aerospace group. He will replace Chris Cholerton as president of defence as Cholerton moves across to head the civil aerospace division.
Dairy Crest advanced after saying that revenue in the nine months to the end of December 2017 was “well ahead” of the previous year thanks to a strong performance from its key brands while Polypiperose after saying it has as entered into exclusive negotiations to sell its French operations.
Paddy Power was boosted by an upgrade to ‘buy’ at Investec, while Softcat was lifted by an upgrade to ‘hold’ at the same outfit and Informa was higher after an upgrade to ‘buy’ at Panmure Gordon and a positive note from Morgan Stanley.
TalkTalk was knocked sharply by a downgrade from Exane BNP Paribas, while Tullow Oil gushed lower after a downgrade to ‘hold’ at Canaccord and Micro Focus was hit by a downgrade to ‘sell’ at Investec.
SSP was trading down after being cut to ‘sell’ at Goldman Sachs and Hargreaves Lansdown slipped after a downgrade to ‘underperform’ at Credit Suisse.
Market Movers
FTSE 100 (UKX) 7,533.55 -0.72%
FTSE 250 (MCX) 20,243.60 -0.63%
techMARK (TASX) 3,427.63 -0.55%
FTSE 100 - Risers
Johnson Matthey (JMAT) 3,460.00p 4.59%
BAE Systems (BA.) 594.00p 1.75%
Rolls-Royce Holdings (RR.) 869.40p 1.47%
SEGRO (SGRO) 578.80p 1.29%
SSE (SSE) 1,305.50p 1.08%
Rentokil Initial (RTO) 296.50p 1.05%
Centrica (CNA) 133.45p 0.83%
Sky (SKY) 1,059.00p 0.76%
Pearson (PSON) 693.80p 0.70%
Paddy Power Betfair (PPB) 8,150.00p 0.68%
FTSE 100 - Fallers
Shire Plc (SHP) 3,327.50p -2.89%
Persimmon (PSN) 2,502.00p -2.68%
Barratt Developments (BDEV) 583.00p -2.60%
AstraZeneca (AZN) 4,885.50p -2.54%
Coca-Cola HBC AG (CDI) (CCH) 2,369.00p -2.39%
Taylor Wimpey (TW.) 190.60p -2.31%
CRH (CRH) 2,619.00p -2.25%
Berkeley Group Holdings (The) (BKG) 3,970.50p -2.12%
Scottish Mortgage Inv Trust (SMT) 454.60p -1.90%
Associated British Foods (ABF) 2,733.00p -1.76%
FTSE 250 - Risers
Euromoney Institutional Investor (ERM) 1,180.00p 5.36%
Dairy Crest Group (DCG) 593.50p 5.09%
FDM Group (Holdings) (FDM) 946.00p 3.48%
UDG Healthcare Public Limited Company (UDG) 820.50p 3.34%
Purecircle Limited (DI) (PURE) 433.50p 3.21%
Dechra Pharmaceuticals (DPH) 2,398.00p 3.09%
RDI Reit (RDI) 35.10p 2.63%
Auto Trader Group (AUTO) 360.10p 2.59%
TI Fluid Systems (TIFS) 262.00p 2.58%
Workspace Group (WKP) 1,028.00p 2.58%
FTSE 250 - Fallers
Capita (CPI) 182.50p -47.53%
TalkTalk Telecom Group (TALK) 119.00p -8.95%
Britvic (BVIC) 734.50p -6.31%
Serco Group (SRP) 88.70p -6.29%
AA (AA.) 126.00p -5.94%
Dignity (DTY) 816.00p -4.99%
Domino's Pizza Group (DOM) 336.60p -4.95%
Vectura Group (VEC) 97.30p -4.33%
Brown (N.) Group (BWNG) 201.61p -3.82%
Hikma Pharmaceuticals (HIK) 970.80p -3.49%