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London open: Stocks nudge lower with retailers in focus
London stocks nudged lower in early trade on Monday as a profit warning from Mothercare kept investors on edge ahead of a big week for retailers.
At 0830 GMT, the FTSE 100 was down 0.1% to 7,713.86, while the pound was flat against the euro at 1.1282 and 0.2% weaker versus the greenback at 1.3538.
Lee Wild, head of equity strategy at Interactive Investor, said: “A rush of corporate updates will keep traders glued to their screens this week. Modest valuations and market-leading dividend yields have already attracted buyers to the housebuilding sector, but latest numbers will need to soothe concerns about falling house prices in London and a slowdown elsewhere.
“The jury is still out on the high street retailers after last week’s mixed bag from Next and Debenhams. After so many failures, M&S is under pressure to provide evidence that a five-year turnaround plan is working. Sales growth is key here and, if the current high-profile executive team can’t achieve success, there seems little hope. At least the share price is currently underpinned by a generous dividend.”
Overnight Visa/IHS data shows a significant slowdown in spending in December which meant 2017 saw a fall in spending for the first time in five years. On an annualised basis, retail sales in the key trading month in the UK were said to be down by 1%.
In corporate news, software group Micro Focus tumbled as its first-half results failed to impress.
Spreadex analyst Connor Campbell said: “Micro Focus actually posted some attention-grabbing numbers, namely a 28.7% surge in revenue to $145.7m and an 80.3% jump in revenue to $1.23bn. Yet the fact that revenue dropped 2.9% year-on-year to $664.7m when the effects of its HPE Software merger were stripped out, alongside its group results coming in at the bottom end of expectations, soured investors on the tech firm, who sent the stock to a four-month low.”
TP Icap edged down as it acquired US-based energy and commodities broker SCS Commodities based for an undisclosed cash sum and further performance-related amounts over five years.
Babcock gained after saying it will lead a bespoke team of industry partners in a bid for the UK Ministry of Defence’s new £1.25bn Type 31e general purpose light frigate programme.
Standard Life got a leg up from an upgrade to ‘buy’ from Jefferies, while Thomas Cook was boosted by an upgrade to ‘overweight’ by Morgan Stanley, and BBA Aviation was up after an upgrade to ‘buy’ at Citi.
Ladbrokes Coral and Paddy Power were hit by downgrades from Morgan Stanley.
Outside of the FTSE 350, in a week that will see updates from the likes of Morrisons, Sainsbury’s, Marks & Spencer, Tesco, and Boohoo, retailer Mothercare tumbled after it warned over profits and said sales fell over the Christmas period.
