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London stocks edged lower in early trade on Thursday, taking their cue from another downbeat session on Wall Street, as investors pored through another blizzard of corporate news.
At 0840 GMT, the FTSE 100 was down 0.3% to 7,212.85, while the pound was off 0.1% versus the euro at 1.1276 and flat against the dollar at 1.3757.
Sterling fell to its lowest level since mid-January overnight after Prime Minister Theresa May rejected the EU’s latest draft text on the Irish border issue, which stated that in the absence of any agreement to the contrary, Northern Ireland stays in a customs union after Brexit and is subject to all EU rules and regulations. The text also left out any reference to an extended transition period, which the UK has requested.
Lee Wild, head of equity strategy at Interactive Investor, noted that the Dow Jones slumped 1.5% with the VIX volatility index is back above its long-term average of 20 for the first time in a week. “Inflation remains a concern here, but it’s in the US that interest rates will rise next and potentially faster than expected this year.
“Under pro-business President Donald Trump, new Federal Reserve chair Jerome Powell is already sounding hawkish, and the latest batch of mid-week data only increases the odds of a more aggressive rate tightening cycle. A strong US economy is great for confidence and jobs, but corporate America will have to absorb more expensive debt, which is why equity traders are selling into the rally from mid-February lows.”
All eyes will be on Powell again on Thursday when the Fed chair testifies before the Senate Banking Committee, with any further talk about an overheating economy likely to give equity market bears another reason to dump stocks.
Investors were digesting the latest housing market survey from Nationwide, which should UK house prices unexpectedly fell in February. House prices were down 0.3% on the month following a 0.8% increase in January, missing expectations of a 0.2% gain. On the year, house prices were up 2.2%, slowing down from a 3.2% jump the month before and well below the 2.6% rise expected.
Nationwide’s chief economist, Robert Gardner, said: “Month-to-month changes can be volatile, but the slowdown is consistent with signs of softening in the household sector in recent months. Retail sales were relatively soft over the Christmas period and at the start of the new year, as were key measures of consumer confidence, as the squeeze on household incomes continued to take its toll.”
Still to come, manufacturing PMI and mortgage approvals for the UK are due from IHS Markit at 0930 GMT, along with net lending to individuals. The manufacturing PMI is expected to slip back to 55.1 in February from January’s 553.
In corporate news, advertising giant WPP tumbled as it blamed technological disruption and squeezed marketing budgets for flatlining revenue as it reported profit in line with muted market expectations.
Rentokil also suffered sharp losses even as it said full year ongoing operating profit, which excludes the results of disposed businesses, increased by 14.8% to £294.7m, reflecting growth in all regions but offset by lower profits in France.
Hastings tumbled even as the insurer reported a 39% jump in 2017 operating profits as its market share grew, while steel producerEvraz nudged lower despite saying full-year profits increased 70% on the back of higher prices.
The retail sector was in focus again a day after Maplin and Toys R Us went into administration, with Carpetright losing a quarter of its market value after it issued its second profit warning of the year.
On the upside, asset manager Schroders gained after it posted a 23% jump in full-year pre-tax profit as assets under management and net inflows rose amid growth across the group.
Irish building materials group CRH gained as it generated an acceleration in profits growth towards the end of the year and saw good potential for more in the US and Europe in 2018.
PureCircle was on the front foot as it announced that its US division and Sweet Green Fields have settled a dispute before the International Trade Commission on the importation of products that were alleged to infringe PureCircle’s patents.
FTSE 250 builders’ merchant Grafton Group, which recently acquired specialist decorators’ merchant Leyland SDM for £82.4m, rose as it reported a 15% jump in full-year profit amid record revenue.
BBA Aviation was in the black after saying it swung to a pre-tax profit in 2017, while oilfield services provider Petrofac gushed higher as its full-year core profit beat expectations.
Madame Tussauds owner Merlin Entertainments racked up strong gains on better-than-expected 2017 core earnings, while aerospace and defence group Cobham surged after posting better-than-expected full-year pre-tax profit.
National Express edged up as it reported a 12% rise in full-year pre-tax profit as revenues increased 6%, while Vesuvius rallied as its full-year revenues came in a touch ahead of expectations.
FTSE 250 housebuilder Bovis Homes, which saw off two takeover approaches last year, was up as it posted a drop in full-year in line with expectations and said it has seen good demand in the first eight weeks of 2018, while Hunting advanced thanks to a small beat on the top line in its 2017 results.
In broker note action, ITV was cut to ‘equalweight’ by Barclays, while Card Factory was initiated at ‘hold’ by Berenberg.
Aveva, Barclays, Beazley, Berkeley Group, EasyJet, Hays, RSA Insurance and Rio Tinto were among the companies whose stock went ex-dividend on Thursday.
