31st Jul 2015 11:17
LONDON (Alliance News) - The FTSE 100 trades lower midday Friday, with the index's heavily weighted resource sector providing a drag as commodity prices slide due to the strong dollar and concerns about economic weakness in China.
The FTSE 100 trades down 0.1% at 6,664.66, putting in danger a three-day winning streak for the index. The FTSE 250 is up 0.2% at 17,558.51, and the AIM All-Share is down 0.1% at 749.63.
The CAC 40 in Paris trades up 0.3% and the DAX 30 in Frankfurt is flat.
Futures indicate Wall Street for a lower open, with the Dow 30, S&P 500 and Nasdaq 100 all pointed down 0.1%. Reporting Friday are Berkshire Hathaway and oil majors ExxonMobil and Chevron.
In the FTSE 100, resource stocks dominate the fallers list, as the commodity price slide continues. Gold prices are slipping lower, hitting a low of USD1,079.88 an ounce, not far off the five-year low of USD1,073.40 an ounce set earlier in July. The fall in the gold price has weighed on precious metals miners' shares, with Fresnillo trading down 2.4% and Randgold Resources down 2.0%.
Other miners also are lower, with Antofagasta down 4.3%, Glencore down 2.7% and Anglo American down 2.4%. The FTSE 350 Mining sector index is the worst performing sector, reading down 1.7%.
"With Chinese shares seeing their worst month in six years, it's hardly surprising that investors aren't keen to hold onto their commodity shares going into August," says Connor Campbell, financial analyst at Spreadex.
The Shanghai Composite has experienced a volatile month of trading, seeing heavy sell-offs in equities and further government and central bank intervention in an attempt to halt the rout. Over the course of the month, the index declined by 14%.
Separately, Antofagasta said Friday it has entered into a definitive agreement with Barrick Gold which will lead to the company acquiring a 50% stake in the Zaldivar copper mine in Chile. The miner will acquire the stake in the holding company, Compañia Minera Zaldívar Limitada, from Barrick Gold for a total consideration of USD1.00 billion in cash.
InterContinental Hotels Group trades down 3.1%, having closed Thursday amongst the best performers with a 4.6% gain. The company late Thursday said it is not in talks with US hotel group Starwood Hotels & Resorts Worldwide Inc about a merger.
IHG said in a statement after the market close that it was responding to recent market speculation. "The board of directors of IHG states that it is not in talks with Starwood with a view to a combination of the businesses," the statement read.
The two companies have been the subject of frequent rumours in recent months, with IHG thought to be facing investor pressure to consider a tie-up. Jefferies, in an April note, said IHG, with its brands and geographic mix, would fill a strategic gap for Starwood.
Lloyds Banking Group trades down 2.5% even after it declared its second dividend since the financial crisis as it reported higher profit in the first half, raised its guidance for 2015, and said it will consider returning surplus capital to shareholders in future.
However, Lloyds took a "disappointing" GBP1.4 billion provision for the payment-protection insurance scandal in the half, bringing the bank's total provision to GBP13.4 billion, as PPI complaint volumes were above expectations in the half, Lloyds said, with claims management companies blamed for the continuing claims.
The bank also counted the GBP117 million cost of a fine imposed by regulators for its handling of PPI complaints and a GBP318 million provision for other conduct, including a GBP175 million charge for complaints about packaged bank accounts.
ITV is the best performer in the FTSE 100, trading up 2.3% after Liberty Global increased its stake in the broadcaster. Liberty acquired a further 138.7 million shares in ITV, increasing its total holding to 398.5 million or 9.9%. At the same time it has entered into a hedging transaction with respect to the new shares it has acquired and has obtained further financing from its hedge counterparty.
JD Sports Fashion is the best mid-cap performer up 7.4%. The retailer said it anticipates beating market expectations for the full year, after the group said trading remained strong in its business in the first half of the year.
JD said like-for-like sales in the half year to August 1 have been ahead of its expectations, though the group has seen its margins squeezed by the weakness of the euro. But assuming its current performance continues, JD Sports said it expects its headline pretax profit for the full year will be around 10% ahead of the current market consensus of GBP110 million.
Essentra is the worst performer in the FTSE 250, down 8.8%. The plastic and fibre products company said its pretax profit fell in the first half of 2015 thanks to exceptional costs it booked in the period, but revenue surged on the back of the acquisition of Clondalkin Specialist Packaging.
Pretax profit for the company fell to GBP45 million from GBP49 million a year earlier, thanks to one-off costs Essentra booked, primarily related to the acquisition of Clondalkin. Revenue rose to GBP550.4 million in the half, up from GBP431.1 million, primarily thanks to the Clondalkin acquisition, as like-for-like revenue growth came in at 1.1%.
One-time FTSE 250 member Afren may have put the final nail in its own coffin, after the board said it has placed the company into administration following weeks of uncertainty since it cancelled a critical general meeting.
"The board has taken steps to put Afren Plc into administration and appoint Simon Appell, Daniel Imison and Catherine Williamson of AlixPartners as administrators," Afren said in a statement.
Earlier in July, the Nigerian oil producer said its shares had been suspended after a fall in production threatened its already controversial and much-debated restructuring plans, casting doubt on whether a general meeting, at which shareholders were due to vote on the company's proposed debt-for-equity swap with its bondholders, would go ahead at all.
In the AIM All-Share index, Thor Mining trades up 20% after it said several companies are evaluating its Molyhil project. The company is attempting to secure project financing and said the capital cost of the project has been reduced by 8%. The miner said several entities are currently reviewing its Molyhil tungsten and molybdenum project in Australia as the company aims to secure project development finance to move it into production during 2016 after completing an updated feasibility study in early 2015.
Oxford Pharmascience Group is down 17% as it said it is encouraged by results from its pilot clinical study of its OXPzero tablet, although it did not meet one of its two primary endpoints. The study was of OXP005, a re-application of the company's OXPzero technology as it has been developed for ibuprofen, designed to cause less upper gastro intestinal irritation than anti-inflammatory drug naproxen.
The tablet was being studied in comparison with Naprosyn with two primary endpoints: a comparison of its overall Lanza score - a clinical rating score of gastrointestinal irritation in the stomach and duodenum on endoscopic evaluation - and a comparison of the total number of erosions observed in the stomach and duodenum.
Oxford Pharmascience said that in the study both OXP005 and Naprosyn exhibited a similar Lanza score. However, the Lanza score endpoint was not met. OXP005 met its other primary endpoint of reduced erosions.
Still ahead in the economic calendar are the Chicago purchasing managers index at 1445 BST and the Reuters/Michigan consumer sentiment index at 1500 BST.
By Neil Thakrar; [email protected]; @NeilThakrar1
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