24th Mar 2016 12:14
LONDON (Alliance News) - UK stocks were in retreat midday Thursday, spooked by another fall in the oil price and a rise in the dollar after US central bankers used speeches to bring forward market expectations for a US rate hike.
The blue-chip FTSE 100 index was down 1.3%, or 83.19 points, at 6,115.92.
The mid-cap FTSE 250 was down 0.8% at 16,733.38, and the AIM All-Share was down 0.2% at 708.96. European stocks were heading south, with the CAC 40 in Paris down 2.0% and the DAX 30 in Frankfurt down 1.6%.
US futures indicated a lower start on Wall Street, the DJIA was pointed down 0.5%, while the S&P 500 and Nasdaq 100 were both aimed down 0.6%.
The dollar has been pushing higher against other currencies over the course of the week, reacting to hawkish comments from members of the US Federal Reserve.
The latest to weigh in was St Louis Fed President James Bullard who said in an interview with Bloomberg on Wednesday that inflation is picking up and may overshoot the Fed's 2% target by next year.
"We're in reasonably good shape" with respect to monetary policy but "the odds that we will fall somewhat behind the curve have increased modestly," Bullard added.
These comments came after last week's release of the Fed's economic projections, which included a dovish dot-path of Fed members' expectations for US interest rates.
However, the hawkish message from Fed speakers this week has propelled the dollar higher against other currencies. The euro now trades the greenback at USD1.1149, down from its post-Fed meeting high of USD1.1342 last Thursday. Over same period, the pound has slumped to USD1.4112 from USD1.4514, despite a small boost from better-than-expected UK retail sales figures.
"Hawkish Fed member comments are at the root of the pullback, with a resulting stronger USD hampering the dollar-denominated commodities space," said Mike van Dulken, head of research at Accendo Markets.
As a result, mining stocks were amongst the worst performers in the FTSE 100. Anglo American was down 7.4%, Antofagasta was down 4.8% and Glencore, down 4.6%.
Emerging markets focused bank Standard Chartered, which has big lending exposure to the commodities sector was down 8.1%.
Oil prices also were affected by the strength in the dollar, as well as a build up of supply. On Wednesday, data from the US Energy Information Administration showed another increase in its crude oil stockpiles.
At midday Thursday Brent oil was at USD39.66 a barrel versus USD40.71 at the London equities close on Wednesday.
UK retail sales volume dropped 0.4% month-on-month in February after January's 2.3% growth. However, this was slightly slower than an expected 0.7% decrease. Sales excluding auto fuel slid 0.2% in contrast to a 2.3% rise a month ago but again smaller than a 1% decline forecast by economists.
Providing a less-positive picture of the UK retailing environment on Thursday was fashion and homewares chain Next.
The FTSE 100 retailer reported growth in profit in its recently ended financial year, as it increased sales in both its directory and retail businesses, but it said 2016 will be a challenging year due to an uncertain global economic environment and changing patterns in consumer spending.
Next said pretax profit in the year to January 30 grew to GBP836.1 million from GBP794.8 million the year before, as revenue rose to GBP4.18 billion from GBP4.00 billion.
For financial 2016-17, Next warned that the outlook for consumer spending does not look "as benign" as it was this time last year. "The year ahead may well be the toughest we have faced since 2008," said Chief Executive Simon Wolfson.
The retailer noted that while UK employment is at a record high, growth in real earnings slowed markedly from September last year. Next also believes there may be a move by consumers away from spending on clothing towards eating out, travel and recreation.
The stock was the worst performer in the FTSE 100, down 13%, having touched its lowest level since December 2013 earlier in trade.
Among mid-caps, outsourcer Mitie Group was the worst performer, down 9.0%. The outsourcer said profit for the full year will meet market expectations, but revenue will fall short following a softer second half.
Mitie said it has seen some revenue shortfalls emerge in the second half of the financial year to the end of March, meaning revenue will miss market expectations. The company has been cutting costs to preserve margins, which will mean profit will be "within the range" of current market expectations, it said.
Also in the FTSE 250, Renishaw traded down 8.0% after the engineer trimmed its profit and revenue guidance for its financial year to the end of June due to weaker trading conditions in the second half.
Renishaw said trading conditions have weakened in the second half, leaving it now expecting pretax profit of GBP67.0 million to GBP83.0 million for the full year, down from its previous guidance of GBP85.0 million to GBP105.0 million.
It also cut its revenue guidance for the second time this year, down to GBP420.0 million to GBP440.0 million from GBP440.0 million to GBP465.0 million previously.
Outside the FTSE 350, Intelligent Energy was the worst performing stock on the London market, down 79% after the energy technology group said it will be unable to complete a funding process by the end of the first quarter.
The company said there is no certainty a funding plan can be completed at all and is it now reviewing its options.
Intelligent Energy said in late February it has received proposals to invest in the equity of its Indian energy management business and has received offers for a convertible bond. But it said these will not be completed in line with its target of the end of the first quarter.
Still ahead in the economic calendar, US continuing and initial jobless claims and durable goods data at 1230 GMT, the Kansas Federal Reserve's manufacturing activity at 1500 GMT and the Baker Hughes US oil rig count at 1700 GMT.
By Neil Thakrar; [email protected]; @NeilThakrar1
Copyright 2016 Alliance News Limited. All Rights Reserved.
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