2nd Aug 2018 17:42
LONDON (Alliance News) - Stocks in London closed sharply lower Thursday as the US ramped up tension in its ongoing trade war with China while sterling was boosted by the interest rate hike and outlook announced by the Bank of England. The FTSE 100 index closed down 1.0%, or 76.98 points, at 7,575.93 Thursday. The mid-cap FTSE 250 index closed down 1.2% at 20,548.97. The AIM All-Share index closed 0.5% lower at 1,087.16.The Cboe UK 100 closed down 1.0% at 12,848.4, the Cboe UK 250 closed down 1.1% at 18,690.06, and the Cboe UK Small Companies closed down 0.6% at 12,301.72.The Bank of England lifted its key benchmark rate to 0.75% from 0.50% previously. The central bank's Monetary Policy Committee - headed by Governor Mark Carney - unanimously decided to make the move whilst maintaining its quantitative easing programme at GBP435 billion.The MPC took the decision - the first hike since November 2017 - after deeming the fall in UK output in the first quarter as temporary after momentum had recovered in the second quarter. They also emphasised the labour market had continued to tighten and unit labour cost growth had firmed."The MPC's economic forecasts haven't changed much since May and its key guidance phrases are unchanged, but the unanimous vote suggests that the Committee's resolve to implement a tightening cycle has increased," Pantheon Macroeconomics Chief UK Economist Samuel Tombs said. "The main forecast change was to the projection for CPI [consumer prices index] inflation, which has risen to 2.25% and 2.10% in 2019 and 2020, respectively, from 2.10% and 2.03% previously," Tombs added. "The upward revision largely reflects the impact of the 3% drop in trade-weighted sterling since May. It dismissed June's inflation print, which undershot its expectations, as a 'largely erratic' development." The MPC added it would be "appropriate" to look at an "ongoing tightening of monetary policy over the forecast period" in order to "return inflation sustainably to its target at a conventional horizon." Despite this, it emphasised any future hikes would be "at a gradual pace and to a limited extent." With Brexit looming in March 2019, the MPC remained sensitive to how consumers, businesses and the markets respond to these developments."Despite the slightly more hawkish tone, we think markets are right to anticipate that the MPC will wait until May 2019 to raise bank rate again," Tombs explained. "Brexit risk will stymie the economy, underlying inflation is weak and the housing market cannot handle a faster pace of tightening. But we expect the economy to regain some momentum next year following a soft Brexit outcome."Sterling was quoted at USD1.3036 Thursday, compared to USD1.3117 at the London equities close on Wednesday. Investors were also cautious after global markets were roiled after the US looked intent on ramping up the trade war pressure on China, whilst Beijing continued to resist what it termed as "blackmail" from the world's largest economy.US Trade Representative Robert Lighthizer said Wednesday that US President Donald Trump ordered him to consider increasing tariffs on Chinese goods worth USD200 billion to 25% from 10% previously.The products to be affected by the hiked duties, Lighthizer added, were announced on July 10.The US announced the initial 10% tariff on the USD200 billion worth of goods as a response to the "retaliation and failure to change its practices" of China following its initial 25% duty on goods worth USD34 billion from the second-largest global economy.Anticipating the announcement, Beijing promised earlier Wednesday to retaliate."The US pressure and blackmail will not work," Foreign Ministry spokesman Geng Shuang said. If the US adopts further measures, China "will inevitably fight back."At the top of the FTSE 100, engine maker Rolls-Royce Holdings closed 6.8% higher after it reported a good half-year of progress with growing confidence heading into the second half of the year. For the six months ended June, Rolls-Royce sank to a pretax loss of GBP1.26 billion from a profit of GBP1.44 billion the year prior. This was despite revenue rising 12% to GBP7.49 billion from GBP6.66 billion the year before. Profit performance was hurt by an exceptional charge of GBP554 million relating to its well-publicised problems with the Trent 1000 engine. The firm expects cash costs for its Trent 1000 and Trent 900 engines related to this to be GBP450 million.Sage closed 2.3% higher as it remained confident of achieving 7% revenue growth in financial 2018 after experiencing an acceleration in growth in the third quarter.For the three months ended June, the enterprise software firm said total revenue increased 6.8%. Over the first nine months of the year, revenue growth stood at 6.5%. Recurring revenue for the quarter rose 6.8%, 6.6% higher for the year-to-date. "We have delivered acceleration in both organic and recurring revenue growth, demonstrating the impact of our primary focus on driving high-quality recurring revenue growth through Sage Business Cloud," Sage Chief Financial Officer Steve Hare said.Amongst the losers, mining firms were struggling as investors worried trade tariffs move will crimp growth from China, the world's largest consumer of metals. In the FTSE 100, Rio Tinto closed at the bottom of the blue-chips down 3.6%. Fresnillo, Anglo American and Antofagasta were close behind down 3.2%, 2.9% and 2.5%. On the FTSE 250, KAZ Minerals dropped 29%. The miner said it will acquire the Baimskaya copper project in Russia for USD900 million in a cash and stock deal. The deal includes an initial consideration of USD675 million and deferred consideration of USD225 million. The initial consideration will be for 75% interest in the Baimskaya project and will comprise of USD436 million in cash and 22.3 million Kaz Minerals shares, representing 5.0% of current share capital of the company valued at USD239 million. The deferred consideration of USD225 million will be paid in either cash or shares in order to acquire the remaining 25% interest in the project.Outsourcing firm Capita dropped 9.8% after the Center for Financial Research & Analysis cut its rating to Sell from Hold and its price target to 140 pence from 200p previously. Ferrexpo plummeted 16%. The iron pellet producer suffered double-digit drop in interim profit, resulting from increasing costs and declining iron ore prices. For the six months ended June, pretax profit dropped to USD179.1 million from USD241.0 million the year prior, despite revenue rising to USD616.7 million from USD591.0 million. Profit performance was hurt by operating expenses rising to USD402.1 million from USD328.1 million the year prior.Ferrexpo noted commodity and local cost inflation had the most significant impact on costs. Commodity costs were USD3.3 higher and inflation USD1.9 higher per tonne for the period compared to the previous year.The benchmark 62% iron ore fine price was also 6% lower than in 2017, averaging USD69.7 per tonne with lower-quality iron ore prices "heavily discounted." On the AIM market, veterinary services firm CVS Group dropped 18% after weaker-than expected performance from its recent acquisitions and the impact of snow hampered growth.For the year ended June, CVS expects revenue to rise 21% to GBP327 million from GBP271 million the year prior. Like-for-like revenue grew 4.9%. CVS explained revenue performance had been held back by "the unusually severe snow" at the start of 2018 which is "estimated to have reduced sales by approximately GBP1.0 million." The firm was also affected by "lower than anticipated short-term performance of some acquisitions." CVS added, however, that the acquisitions have since shown an improvement in their performance.The euro was quoted at USD1.1617 at the London equities close Thursday, from USD1.1662 at the European equities close Wednesday.Brent oil was higher quoted at USD73.30 a barrel midday Thursday, from USD72.59 at the London equities close Wednesday.Gold was quoted broadly unchanged at USD1,214.09 an ounce Thursday, against USD1,218.47 at the London market close on Wednesday.Stocks in New York were broadly higher at the London equities close. The DJIA was down 0.4%, the S&P 500 index up 0.2% and the Nasdaq Composite up 0.6%.In mainland Europe, in Paris the CAC 40 ended down 0.7%, while the DAX 30 in Frankfurt ended down 1.5%.In the economic calendar on Friday, services PMI data is due from France, Germany, the eurozone and the UK at 0850 BST, 0855 BST, 0900 BST and 0930 BST. Eurozone retails sales figures will also be delivered at 1000 BST.In the US, employment figures are due to be released at 1330 BST with PMI data following at 1445 BST. US oil rig count figures from Baker Hughes is due at 1800 BST.In UK corporate events on Friday, interim results are due from British Airways-owner IAG, gambling firm William Hill, packaging firms Essentra and Mondi and aerospace engineer Cobham. Banking giant Royal Bank of Scotland Group and hotel operator Millenium & Copthorne Hotels also delivers half years figures. Trading updates are due from pet animal products retailer Pets at Home Group and credit provider S&U.Related Shares:
Anglo AmericanKAZ.LCVS GroupCapitaRio TintoSage GroupFerrexpoAntofagastaFresnilloRolls-RoyceAntofag.5%pr