London close: Stocks and services sector fail to regain lost ground
London stock finished Thursday where they started the week as some disappointing trading updates and a bumper crop of companies going ex-dividend took points off the main indices, while sterling could not hold onto its earlier gains from a rather weak recovery in the key services sector.
The FTSE 100 closed down 40.5 points or 0.54% at 7,502.69, roughly where it started the week, as the pound was roughly flat against the dollar after rising and falling earlier and steadily losing more territory against the euro to 1.1336.
Sterling had earlier popped a little higher on a data showing that UK services sector activity recovered, though not particularly impressively, last month after losing the previous month.
The services purchasing managers' index for April climbed to 52.8 from 51.7 a month earlier, according to the IHS Market survey, but this was short of estimates for around 53-53.5.
Following a weak manufacturing report and a limp recovery from construction earlier in the week, the all-sector PMI index rose to 53.2 but failed to recoup the fall to 51.9 in March from 54.2 in February. The composite index was the second-weakest since the Brexit vote and indicates the economy is growing at a quarterly rate of around 0.2% at the start of the second quarter.
In the services sector, the modest recovery output was still only to the second softest level seen for just over a year-and-a-half, with subdued new business growth persisting as consumers remain fairly cautious on finances.
"The surveys have indicated that sales, investment and hiring are being hit by uncertainty about the economic outlook as well as sluggish domestic demand, notably among consumers," said IHS Markit economist Chris Williamson.
"The disappointing services data will add to expectations that the MPC will take its finger firmly off the rate hike trigger. Any further slowing will also raise questions as to whether the November rate hike may have been ill-timed."
Meanwhile, investors continued to digest the latest statement from the US Federal Reserve, after it stood pat on rates as expected on Wednesday but pointed to the fact that inflation is beginning to edge higher.
The central bank made a number of tweaks to its accompanying statement. At the March meeting, it had said that indicators "have continued to run below 2%", but in the latest statement, the Fed said "overall inflation and inflation for items other than food and energy have moved close to 2%".
The Committee also said that inflation on a 12-month basis is expected to run near its "symmetric 2% objective over the medium term", with the use of the word "symmetric" grabbing investors' attention as it suggests the Fed is prepared to allow inflation to over- and under-shoot the 2% target, rather than consider it a concrete target.
Engine maker Rolls-Royce slipped as it said its expectations for 2018 were unchanged after reorganising spending to offset costs for extra inspections of its Trent 1000 engines.
Smith & Nephew slumped as it replaced its full year revenue guidance after a weak first quarter for hip replacements and wound-care, especially in the US and other emerging markets. Flat underlying sales in the first three months of the year led to the company trimming its full year expectations for revenue growth to 2-3%, only two months after giving guidance for growth of 3-4%.
Engineering company IMI fell despite saying current trading remains consistent with market consensus expectations for the year.
Car and home insurer Esure was on the front foot after it reported an 18% jump in first-quarter gross written premiums thanks to a solid performance form its motor division and said it remains on track to deliver profitable growth in 2018, although its home unit was hit by claims related to bad weather.
As the dollar was sent lower by the Fed report, this helped metals prices and saw London's heavyweight miners lifted, including Antofagasta and Glencore. Gold was also boosted, in turn dragging Randgold Resources and Fresnillo higher.
Glencore also helped itself with news that production in its first quarter was largely in line with expectations across all commodity groups and confirming that its full-year guidance remained unchanged from what it presented in February.
Leading the risers on the FTSE 250, Entertainment One gained on the back of a deal struck with British TV production company Fired Up Films to assist in the production of scripted and non-scripted shows, focusing on blue-chip documentaries factual entertainment formats, feature docs and drama projects.
Lancashire Holdings rallied as it posted a 47.7% rise in first-quarter pre-tax profit as gross written premiums and its return on equity rose and Centamin edged up as the gold miner said first-quarter profit nearly doubled.
On the broker note front, Go-Ahead was hit by a cut to 'hold' at Deutsche Bank, while BT was downgraded to 'equalweight' at Barclays. Direct Line was reduced to 'neutral' at JPMorgan and AO World was cut to 'hold' by Peel Hunt.
Elsewhere, AA, G4S, GoCompare, Card Factory, Derwent London, Elementis, Hastings Group, Just Group, Kingfisher, LSE, McCarthy & Stone, Mondi, Morgan Advanced Materials, Senior, Unilever, JD Wetherspoon and Rightmove were among the companies whose stock went ex-dividend.
Market Movers
FTSE 100 (UKX) 7,502.69 -0.54%
FTSE 250 (MCX) 20,365.87 -0.68%
techMARK (TASX) 3,421.42 -1.10%
FTSE 100 - Risers
Evraz (EVR) 490.00p 2.94%
Randgold Resources Ltd. (RRS) 6,108.00p 2.35%
TUI AG Reg Shs (DI) (TUI) 1,723.00p 1.44%
Fresnillo (FRES) 1,296.50p 1.29%
Barratt Developments (BDEV) 561.40p 1.23%
Morrison (Wm) Supermarkets (MRW) 242.60p 1.21%
Taylor Wimpey (TW.) 192.90p 1.15%
Intertek Group (ITRK) 4,985.00p 0.97%
United Utilities Group (UU.) 770.00p 0.97%
Tesco (TSCO) 238.70p 0.89%
FTSE 100 - Fallers
Smith & Nephew (SN.) 1,302.50p -7.00%
Mondi (MNDI) 1,894.50p -6.95%
BT Group (BT.A) 232.35p -4.09%
Kingfisher (KGF) 278.80p -4.06%
NMC Health (NMC) 3,512.00p -3.04%
G4S (GFS) 258.60p -2.56%
Standard Chartered (STAN) 742.40p -2.50%
Smurfit Kappa Group (SKG) 3,022.00p -2.45%
London Stock Exchange Group (LSE) 4,297.00p -1.76%
Vodafone Group (VOD) 208.95p -1.74%
FTSE 250 - Risers
Entertainment One Limited (ETO) 285.20p 4.85%
Fisher (James) & Sons (FSJ) 1,780.00p 4.34%
RHI Magnesita N.V. (DI) (RHIM) 4,486.00p 3.27%
Stobart Group Ltd. (STOB) 243.00p 2.53%
Auto Trader Group (AUTO) 369.20p 1.90%
Wizz Air Holdings (WIZZ) 3,284.00p 1.83%
CYBG (CYBG) 316.20p 1.74%
Polypipe Group (PLP) 393.60p 1.60%
Thomas Cook Group (TCG) 133.50p 1.44%
Pennon Group (PNN) 710.00p 1.28%
FTSE 250 - Fallers
Go-Ahead Group (GOG) 1,735.00p -11.21%
IMI (IMI) 1,060.00p -6.11%
Hunting (HTG) 777.50p -6.10%
Elementis (ELM) 277.40p -4.34%
Inmarsat (ISAT) 375.00p -4.14%
Hastings Group Holdings (HSTG) 269.40p -3.99%
TBC Bank Group (TBCG) 1,710.00p -3.82%
Ashmore Group (ASHM) 398.00p -3.68%
McCarthy & Stone (MCS) 133.20p -3.48%
Contour Global (GLO) 248.00p -3.12%