London close: Stocks succumb to profit-taking
London stocks ended lower with financials taking a hit from a dovish set of US central bank policy meeting minutes.
At the closing bell, the FTSE 100 was down by 45.16 points or 0.61% to 7,387.87. For its part, Sterling as little changed versus the US dollar, dipping 0.06% to 1.2883.
There was also a fair bit of 'analyst chatter' around US president Donald Trump's decision overnight to disband two business councils and what that might mean as regards his ability to bridge the political and social divide in order to pass much needed reforms.
Commenting on the situation in markets, Analyst Henry Croft at Accendo Markets said: "Investors continue to analyse the fallout from the disbanding of President Trump’s business councils, seen as a key link between corporate America and the White House. At best, it could remove pressures on CEOs to defend the President’s views in order to focus on running profitable businesses; at worst it could slow the administration’s ability to enact key economic policies such as tax reform and sector deregulation."
He also noted that less hawkish minutes from the US Federal Reserve's rate setters compounded woes from the US, with disagreement between policymakers hurt banks across the world, also noting that oil was retreating as dollar bounced.
The split at the heart of the US Federal Open Markets Committee was revealed as minutes from the last central bank monetary policy meeting showed an unexpected divergence of opinion among the policymakers on whether they should carry on with the interest rate hikes or not.
Although "most participants expected inflation to pick up over the next couple of years….and to stabilize around the 2% objective over the medium term", the minutes said, many participants see "some likelihood that inflation might remain below 2% for longer than they currently expected, and several indicated that the risks to the inflation outlook could be tilted to the downside".
In the aftermath of the FOMC minutes, the probability of a December rate hike plunged below 40%, which weighed on lenders on both side of the Pond.
On a cheerier note, UK retail sales beat forecasts at the top line but strong food sales continue to mask wider weakness as consumers continue to feel the pinch.
Total retail sales including fuel rose 0.3% for a second month, the Office for National Statistics revealed, beating the average economist estimate of 0.2%.
Excluding petrol, retail sales increased 0.5% month-on-month in July, better than the consensus forecast for a 0.1% rise but down from the revised previous month's 0.6% rise.
Yet that did not offer much to cheer about, said analyst Connor Campbell at Spreadex, as July and June's readings were halved from the initial 0.6% growth stated last month.
COMPANY NEWS
Hikma Pharmaceuticals was hammered after reporting a 1% rise in first-half sales and trimming its guidance for the full year as the generic drugs arm faces tougher market conditions. For the full year management now see sales rising to "around $2bn", down from previous guidance of $2-2.1bn issued in May.
In comparison, shares in retailer Kingfisher received only a light hammering, after sales in the second quarter fell and the B&Q and Screwfix owner expressed caution on the outlook for the UK and France in the second half. In the three months to 31 July, group like-for-like sales shrank 1.9%, deteriorating from the 0.6% decline in the first quarter, though management said they "remain comfortable" with the market forecast of underlying earnings per share of 26p for the full year.
Banks, led by Standard Chartered, RBS and HSBC, were been buffeted lower by the dovish reading of the Fed minutes, which cast doubts on the likelihood of another rate hike in the US this year. Also, there were reports that British banks are facing massive Libor lawsuit from the US Federal Deposit Insurance Corporation.
Fallers were led by a list of stocks going ex-dividend, including British American Tobacco, Evraz, Legal & General Group, Man Group, Merlin Entertainments, Millennium & Copthorne Hotels, Pearson, Reckitt Benckiser Group, Schroders, and Segro.
Marshalls, the making of paving slabs and interior tiling, was headed higher as it reported revenue up 8% and EBITDA up 13% as it saw a continued improvement in operating margins.
Johnson Matthey was helped by a note from Bernstein that suggested forthcoming bans on the sale of diesel vehicles in several European countries should not be a reason to despair for producers of automotive catalysts, which has likely contributed to JMAT's stock falling 25% since October.
Kaz Minerals was on the front foot as revenues more than doubled thanks to higher volumes and commodity prices. Together with net cash costs of $0.64 per pound of copper, that drove a greater than four-fold jump in operating profits to $291m.
Market Movers
FTSE 100 (UKX) 7,387.87 -0.61%
FTSE 250 (MCX) 19,773.08 -0.43%
techMARK (TASX) 3,409.03 -0.19%
FTSE 100 - Risers
Fresnillo (FRES) 1,566.00p 3.85%
Johnson Matthey (JMAT) 2,818.00p 2.32%
Randgold Resources Ltd. (RRS) 7,405.00p 1.79%
London Stock Exchange Group (LSE) 3,950.00p 0.89%
Mondi (MNDI) 2,061.00p 0.88%
Coca-Cola HBC AG (CDI) (CCH) 2,593.00p 0.70%
TUI AG Reg Shs (DI) (TUI) 1,334.00p 0.68%
Direct Line Insurance Group (DLG) 388.80p 0.65%
Informa (INF) 711.50p 0.57%
Taylor Wimpey (TW.) 193.30p 0.47%
FTSE 100 - Fallers
Kingfisher (KGF) 294.80p -4.10%
Standard Chartered (STAN) 755.00p -2.72%
Admiral Group (ADM) 2,000.00p -2.30%
Royal Bank of Scotland Group (RBS) 258.10p -2.20%
Ashtead Group (AHT) 1,580.00p -2.11%
Legal & General Group (LGEN) 267.70p -1.98%
British American Tobacco (BATS) 4,832.00p -1.97%
easyJet (EZJ) 1,301.00p -1.89%
Marks & Spencer Group (MKS) 319.10p -1.75%
Barclays (BARC) 197.25p -1.74%
FTSE 250 - Risers
Nostrum Oil & Gas (NOG) 418.30p 5.33%
FDM Group (Holdings) (FDM) 945.50p 5.00%
Marshalls (MSLH) 416.30p 4.97%
Hochschild Mining (HOC) 272.00p 4.86%
Sirius Minerals (SXX) 28.65p 4.56%
Softcat (SCT) 413.80p 2.99%
Polymetal International (POLY) 934.50p 2.35%
Petra Diamonds Ltd.(DI) (PDL) 91.90p 1.77%
St. Modwen Properties (SMP) 347.00p 1.76%
QinetiQ Group (QQ.) 240.20p 1.69%
FTSE 250 - Fallers
Hikma Pharmaceuticals (HIK) 1,190.00p -10.46%
Rank Group (RNK) 225.00p -6.09%
Evraz (EVR) 257.80p -4.06%
Tullow Oil (TLW) 155.80p -3.89%
Aldermore Group (ALD) 226.50p -3.33%
BGEO Group (BGEO) 3,398.00p -3.03%
Hunting (HTG) 421.90p -3.01%
Virgin Money Holdings (UK) (VM.) 278.10p -2.83%
CLS Holdings (CLI) 213.80p -2.77%
NMC Health (NMC) 2,326.00p -2.60%