26th Sep 2019 16:53
(Alliance News) - Stocks in London ended broadly higher on Thursday with the FTSE 100 managing to end in the green in the face of profit warnings from four of its constituents.
The FTSE 100 index closed up 61.09 points, or 0.8%, at 7,351.08. The FTSE 250 ended up 43.69 points, or 0.2%, at 19,818.61 and the AIM All-Share down 3.46 points, or 0.4%, at 871.23.
The Cboe UK 100 ended up 1.0% at 12,482.97, the Cboe UK 250 closed up 0.1% at 17,695.49 and the Cboe Small Companies ended flat at 10,861.89.
"The FTSE 100 surge was held back by a quartet of disappointing corporate announcements, with Pearson, Imperial Brands, IAG, and Carnival all issuing profit warnings. Travel firms have hit the collective investor consciousness of late, with the demise of Thomas Cook leaving traders wondering where it leaves competitors. However, with rising energy prices hitting Carnival, and strikes hurting IAG, there are clearly issues elsewhere that will keep traders preoccupied," said IG Group's Josh Mahony.
In Paris the CAC 40 ended up 0.7%, while the DAX 30 in Frankfurt ended up 0.4%.
In the FTSE 100, Pearson ended the worst performer, down 14% after the education publisher warned annual adjusted operating profit would be at the lower end of its guidance range in its US Higher Education Courseware business.
The former Financial Times newspaper owner has been struggling in the US for several months as students shun print textbooks in favour of cheaper online and digital resources.
Pearson anticipates 2019 revenue to stabilise, but adjusted operating profit to be at the bottom of its guidance range of GBP590 million to GBP640 million. Adjusted earnings per share also is predicted to be at the bottom of the guidance range of 57.5p to 63.0p.
In 2018, adjusted operating profit totalled GBP546 million, while adjusted earnings per share was 70.3p.
Pearson said revenue from US Higher Education Courseware is down by around 10% in the first nine months of 2019, mainly due to significant acceleration of print attrition in the key trading season.
Imperial Brands closed down 13% after the tobacco firm warned the backlash against vaping and e-cigarettes in the US is set to hurt revenue this year.
Imperial predicts net revenue growth for its financial year ending Monday next week will be 2%, slashing its previous 2.5% growth forecast, as several US local governments enact e-cigarette bans over serious health concerns and the US federal government threatens the same.
The company has "stepped up" its retail engagement programmes in the US over the second half of the year, and has generated improved customer off-take, but it was "less than expected" due to the "slowdown in the US vapour category combined with increased competitor discounting".
This has hurt the firm's overall revenue and profitability, although the overall NGP business is set to grow revenue by approximately 50% in financial 2019, even if this is below previous expectations.
Carnival ended down 7.2% after the cruise line operator lowered earnings guidance for both the fourth quarter and for the twelve months to the end of November due to higher fuel prices.
The company expects full year adjusted earnings per share to be in the range of USD4.23 to USD4.27, reflecting recent fuel price increases, compared to June guidance of USD4.25 to USD4.35, and adjusted earnings per share of USD4.26 in financial 2018.
"Due to an USD0.08 impact from the recent spike in fuel prices caused by geopolitical events, we are reducing our full year guidance by USD0.05 per share," explained President & Chief Executive Arnold Donald.
International Consolidated Airlines Group closed down 5.1% after the British Airways parent warned over a drop in annual profit and said industrial action and other recent disruption has cost the company EUR170 million.
IAG said the net financial impact of allowing customers to re-book flights or receive refunds due to pilot strikes has resulted in a EUR137 million hit with other "disruption events" at Heathrow costing the company a further EUR33 million. Booking trends in low cost airlines in IAG's portfolio will also knock the company's finances, the firm said.
At current fuel prices and currency exchange rates, IAG expects 2019 operating profit before exceptional items to be EUR3.27 billion, 6.6% lower than the EUR3.49 billion pro-forma figure achieved in 2018. Previously, IAG had guided for profit in 2019 to be flat on the year before.
Furthermore, the British Airways Pilots Union on Thursday said it will consider more strike dates and took aim at IAG for attributing the profit warning to recent industrial action.
The pound was quoted at USD1.2358 at the London equities close, flat against USD1.2360 at the close Wednesday.
On the political front, Brexit Secretary Steve Barclay and the EU's chief negotiator Michel Barnier will meet on Friday in the latest attempt to make progress towards a deal.
Downing Street acknowledged there are still "significant obstacles" to reaching an agreement with time counting down to the October 31 deadline.
However, UK Prime Minister Boris Johnson believes progress is being made in his efforts to get rid of the Irish backstop, the contingency measures aimed at preventing a hard border by keeping the UK closely aligned with EU rules.
The PM's official spokesman said there remained a "long way to go" before a deal could be reached but "progress has been made".
Moreover, there remains a large gap between the EU and the UK side on customs arrangements for Northern Ireland, with Brussels keen to keep it inside a customs union, something that would be unacceptable to Johnson.
The European Parliament's Brexit co-ordinator Guy Verhofstadt, who met Barnier on Thursday, said the UK's proposals to resolve the Northern Ireland issues "fall short".
The euro stood at USD1.0944 at the European equities close, lower than USD1.0960 late Wednesday.
Stocks in New York were lower at the London equities close amid fresh developments in an inquiry into the impeachment of President Donald Trump.
The DJIA was down 0.2%, the S&P 500 index down 0.3%, and the Nasdaq Composite down 0.5%.
The US House Intelligence Committee has released a redacted version of a whistleblower complaint pertaining to Trump's phone call with Ukrainian President Volodymyr Zelensky in July.
The complaint said the anonymous person was concerned "the president of the US is using the power of his office to solicit interference from a foreign country in the 2020 US election."
Earlier this week the Democrats launched an impeachment inquiry against the Republican president, alleging he betrayed his oath of office.
On the economic front, data from the Commerce Department confirmed the US economy's slowdown in the second quarter but new data showed a worsening plunge in investment by companies, notably hitting the manufacturing sector.
The world's largest economy expanded at 2.0% in the April-June period, down markedly from growth at the start of the year, the Commerce Department said, matching an estimate released last month.
Forecasts suggest the economy should expand at a similar pace in the third quarter, putting the US on track to fall short of Trump's 3.0% GDP target for a second straight year.
In a separate release, US consumers spent the most in the second quarter in almost five years. Spending was weaker than previously thought, however, as consumers shelled out less for food and personal care.
Consumer spending, a mainstay of the US economy, has become its lone bright spot, with exports, agriculture and manufacturing and business investment all weighed down by falling global demand.
The personal consumption expenditures price index increased 2.4% in the second quarter, compared with an increase of 0.4% in the first three months of the year.
Excluding food and energy prices, personal consumption expenditures increased 1.9%, compared with an increase of 1.1% in the first quarter.
Brent oil was quoted at USD61.78 a barrel at the London equities close, firm against USD61.45 at the close Wednesday.
Gold was quoted at USD1,507.20 an ounce at the London equities close, down from USD1,523.10 late Wednesday.
The economic events calendar on Friday has French inflation readings at 0745 BST and eurozone consumer confidence data at 1000 BST. In the afternoon, there is US personal consumption expenditure figures at 1330 BST - the core reading is the US Federal Reserve's preferred gauge of inflation.
The UK corporate calendar on Friday has trading statements from residential landlord Grainger and from water company Pennon Group.
By Arvind Bhunjun; [email protected]
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