9th May 2014 16:06
LONDON (Alliance News) - The FTSE 100 closed firmly down Friday, ensuring that it ended the week lower than in started it for the first time in four weeks, as investors looked to shed typically risky assets, including equities, ahead of a controversial referendum in eastern Ukraine this weekend.
Russian President Vladimir Putin risked further escalated the crisis in Ukraine as he made his first visit to the recently annexed peninsula of Crimea. In a short speech delivered in the port of Sevastapol, Putin said that annexing Crimea to Russia had "re-established the historic truth."
His comments came as Ukrainian Interior Minister Arsen Avakov said that security forces had killed about 20 pro-Russian fighters in Mariupol, a harbour city near the border with Russia. One soldier was killed and five others injured, Avakov said, adding that four pro-Russian fighters had been arrested.
In Kiev meanwhile, the Foreign Ministry condemned Putin's visit to Crimea, saying it was in "blatant disrespect" of Ukrainian and international law. "This provocation makes yet another clear evidence that Russia has been consciously escalating tensions in Ukrainian-Russian relations and (is) unwilling to bring bilateral disputes to diplomatic solution," the ministry wrote on its website.
The fighting comes ahead of unofficial referendums in two eastern provinces of Ukraine on Sunday on whether to follow Crimea's example and break away from the Ukraine.
The FTSE 100 had closed at a 10-week higher Thursday, but ended down 0.4% at 6,814.57 Friday, and down 0.1% for the week. The FTSE 250 closed down 0.5% at 15,885.21, and down 0.3% for the week, while the AIM All-Share index closed down 0.6% at 806.27, and down 2.3% for the week.
In Europe, both the CAC 40 and DAX 30 also closed firmly lower, losing 0.7% and 0.3%, respectively. However, for the week, the CAC 40 closed up 0.4% and the DAX 30 closed up 0.3%.
In the US, at the close of the UK equity market, Wall Street is modestly lower. The DJIA, NASDAQ Composite, and S&P 500 are all down between 0.1% and 0.3%.
At the individual UK stock level, Petrofac ended the day as the heaviest faller in the blue-chip index, closing down 16%. The oil and gas services company issued a profit warning after it said that the planned development of the Greater Stella Area oil field in the North Sea would be delayed until next spring, it was hit by a low output at a Romanian oil field, and won fewer new energy services contracts than it had expected.
It said that it now expects its net profit to fall to between USD580 million and USD600 million in 2014, from USD650 million in 2013. In February, the company had predicted that profit would be flat or moderately higher.
Petrofac's sharp decline meant the FTSE 350 Oil Equipment Services & Distribution sector index closed down 5.8%, making it the biggest declining sector.
International Consolidated Airlines Group, closing down 4.8%, was the second biggest loser in the FTSE 100. Shares in the company rose steeply at the UK equity market open, but soon turned negative.
The fall came despite the company predicting that its operating profit will rise in 2014, after its operating loss almost halved in the first quarter as the continued restructuring of Iberia drove down losses at the Spanish airline. The parent of British Airways and Spanish airlines Iberia and Vueling said it now expects its 2014 operating profit to be at least EUR500 million above the EUR770 million it booked in 2013. It reiterated that it expects revenue to remain relatively flat, but cost cutting will push up its profit margin.
Tullett Prebon was the second-biggest faller in the FTSE 250. The interdealer broker closed down 5.9% after it reported a decline in revenue due to subdued financial markets. Revenue in the four months to end-April amounted to GBP248.0 million, 15% lower than the comparable period a year earlier.
The firm blamed difficult market conditions and said it will take "a number of actions" to further reduce headcount and other fixed costs. It expects the measures to reduce annual fixed costs by about GBP20.0 million, but also estimated that the cost of making the cuts will be around the same amount as it will save in a year, half of which is expected to be non-cash.
Tullett also announced a deal to acquire oil-futures broker PVM Oil Associated Ltd. It said the acquisition, which is worth up to USD160.0 million, will increase its scale in the energy sector and give it "a significant presence" in broking crude oil and petroleum products complementing its existing activities in these areas, as well as expanding the price data that can be offered to clients.
Drax Group, ending the day down 2.5%, was another big mid-cap loser. The UK energy provider's shares fell after it revealed that since publishing its preliminary results on February 18, mild weather across Europe had led to a further fall in power prices, while abnormally high wind generation has pushed down the price of its renewables obligation certificates prices.
As a result, Drax said that, unless markets improve, its full year earnings before interest, taxation, depreciation and amortisation and earnings per share for 2014 would be below current market forecasts.
In the forex market, "both the pound and the euro are suffering one of their worst days for some time, as profit-taking sets in after both hit new long-term highs yesterday," says Brenda Kelly, chief market strategist at IG. "Given the scale of the upward moves seen in these currency crosses, it was almost inevitable that there would be an adverse reaction in due course," she says.
At the close of the UK equity market, sterling was trading at a multi-day low of USD1.6853, while the euro was at a monthly low of USD1.3764.
The single currency was not helped by some weaker-than-expected German trade data. Germany's exports in March declined at the fastest pace since last May, and imports fell for the first time this year, as the Ukraine crisis and the slowdown in China weighed on demand. As a result, the trade surplus declined to a seasonally adjusted EUR14.8 billion, from EUR15.8 billion in February.
The pound, meanwhile, was hit by some unconvincing UK production data.
Manufacturing production grew at 3.3% year-on-year in March, faster than the 2.9% growth expected, but slowing from 3.9% in February. Meanwhile, industrial production expanded by 2.3% annually in March, slower than the 2.4% expected growth, and also slower than the 2.5% recorded in February.
In a quiet day in the data calendar Monday, the US monthly budget statement for April is released at 1800 GMT.
In the corporate calendar, FTSE 250-listed Diploma is scheduled to release full-year results. Also in the mid-cap index, Lonmin is due to provide a second quarter production report and Just Retirement releases a trading update.
By James Kemp; [email protected]; @jamespkemp
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