London close: Punchy pound knocks FTSE down again
London stocks lost out on their earlier modest gains by the close on Thursday as the pound remained firm and UK corporate and economic news was mixed.
The FTSE 100 fell 0.4% to 7,615.84, it's worst finish since before Christmas as the pound gained 0.2% versus the dollar to 1.4268 but fell 0.4% on the euro 1.1427.
Sterling not only consolidating but hitting a new 19-month high saw another step lower for London's blue chip companies that have major exposure to the dollar, as on the previous session. With around two thirds of London's benchmark index making most of their earnings in dollars, they have made enjoyed the many months of the pound's post-referendum slump but have seen their shares get some payback this week.
"The FTSE 100 is one of the most sensitive of all large stock markets to domestic currency effects, as was seen in the rapid recovery following the panic selling in June 2016 on the EU referendum outcome, and the rise in the Pound is becoming an ever greater headwind to further gains for stocks," said David Cheetham, analyst at XTB.
Among the dollar-heavy fallers were cigarette makers British American Tobacco and Imperial Brands, Rolls-Royce and IAG.
The stronger pound is good news for retailers from a buying perspective, so Primark owner AB Foods, Marks & Spencer and Kingfisher were all among the risers.
UK data points on Thursday were no help to general sentiment and indicated that sterling's strength was down to dollar weakness.
Mortgage approval numbers dropped off more than expected last month, with approvals by the main high street banks falling to their lowest level since January 2015, according to UK Finance.
Meanwhile, a survey from the Confederation of British Industry showed UK retail sales rose in line with expectations in January. The CBI’s retail sales balance fell to +12 from +20 in December.
But the real focus point for the day will be the ECB’s interest rate decision at 1245 GMT, followed by President Mario Draghi's press conference at 1330 GMT. No changes are expected, so investors will be paying close attention to Draghi’s comments.
Elsewhere on the UK corporate front, Guinness and Scotch whisky maker Diageo rallied as it served up half-year sales growth and operating profit growth both ahead of market expectations despite a number of market challenges and higher marketing investment. The FTSE 100 group toasted the gin drinkers of Europe, and Britain in particular, where Tanqueray was one of the best performing brands of the period.
Smith & Nephew was riding high after an upgrade to ‘overweight’ at JPMorgan Cazenove on the back of better tax and forex expectations, while Next was up after RBC Capital Markets lifted the stock to ‘outperform’.
Elsewhere, amid an ongoing takeover bid from 21st Century Fox, Sky advanced as it posted a 5% increase in like-for-like revenue for the first half.
Kier Group was the big winner on the day, jumping 15% after saying it had traded in line with expectations in the six months to the end of December, with joint-venture contracts taken on from collapsed Carillion both performing fine.
Close Brothers surged 8% after it reported a rise in its loan book and said it remained well placed for the full 2018 financial year, as it announced the departure of its finance director.
Dechra Pharmaceuticals gained 7% as the company announced the acquisition of Netherlands-based AST Farma and Le Vet for €340m.
Garfunkel’s and Frankie & Benny’s owner Restaurant Group reversed earlier losses even as it reported a drop in full-year sales amid a challenging environment, while pub group Greene King frothed higher after initial losses from its report that like-for-like sales in the 37 weeks to 14 January fell 1.4%.
On the downside, mining giant Anglo American slipped as it reported a 5% jump in 2017 output, while Countryside Properties ticked lower after saying it had a “strong” first quarter and is trading in line with expectations for the full year, as it reported a 47% jump in total completions.
Renishaw tumbled as investors booked profits after it posted a 73% increase in first-half profits and wealth manager St James's Place turned lower even as it said full-year net inflows rose 40% to £9.5bn as funds under management increased 20% to £90.7bn.
In broker note action, Grainger also rose after an upgrade to ‘overweight’ at JPM, while Bunzl was boosted by an upgrade to ‘buy’ at Goldman Sachs.
Sage was down after analysts at Deutsche Bank said the software group would find it challenging to meet its full year targets.
Market Movers
FTSE 100 (UKX) 7,615.84 -0.36%
FTSE 250 (MCX) 20,521.74 -0.08%
techMARK (TASX) 3,446.22 -0.73%
FTSE 100 - Risers
Smith & Nephew (SN.) 1,293.50p 4.15%
Bunzl (BNZL) 2,008.00p 3.45%
Next (NXT) 5,054.00p 2.89%
Associated British Foods (ABF) 2,861.00p 2.77%
Mediclinic International (MDC) 629.60p 2.08%
Marks & Spencer Group (MKS) 311.20p 1.97%
Kingfisher (KGF) 347.90p 1.61%
ITV (ITV) 170.65p 1.58%
Admiral Group (ADM) 1,878.00p 1.54%
Sky (SKY) 1,036.00p 1.22%
FTSE 100 - Fallers
Sage Group (SGE) 749.40p -2.45%
British American Tobacco (BATS) 4,870.00p -2.13%
Rolls-Royce Holdings (RR.) 844.00p -2.04%
Imperial Brands (IMB) 2,864.00p -1.92%
International Consolidated Airlines Group SA (CDI) (IAG) 637.20p -1.88%
easyJet (EZJ) 1,647.50p -1.88%
Relx plc (REL) 1,557.00p -1.83%
3i Group (III) 908.60p -1.77%
Shire Plc (SHP) 3,364.00p -1.75%
Paddy Power Betfair (PPB) 8,030.00p -1.71%
FTSE 250 - Risers
Kier Group (KIE) 1,104.00p 15.30%
Dechra Pharmaceuticals (DPH) 2,246.00p 8.92%
Close Brothers Group (CBG) 1,570.00p 8.20%
Indivior (INDV) 418.00p 5.10%
Mitie Group (MTO) 181.90p 4.12%
Grainger (GRI) 296.40p 3.93%
Beazley (BEZ) 551.00p 3.77%
Mitchells & Butlers (MAB) 266.60p 3.09%
Capita (CPI) 365.30p 3.02%
OneSavings Bank (OSB) 409.00p 2.25%
FTSE 250 - Fallers
Renishaw (RSW) 4,848.00p -14.04%
SSP Group (SSPG) 623.00p -4.81%
Kaz Minerals (KAZ) 851.00p -4.38%
Dignity (DTY) 943.27p -4.04%
Inmarsat (ISAT) 479.50p -3.85%
Hikma Pharmaceuticals (HIK) 995.00p -3.82%
Ferrexpo (FXPO) 287.00p -3.43%
Essentra (ESNT) 509.00p -3.05%
AA (AA.) 149.90p -2.66%
Petrofac Ltd. (PFC) 549.40p -2.31%