FTSE underperforms as US data lifts New York

(Alliance News) - Stocks in London ended lower on Thursday, weighed down by a handful of shares going ex-dividend, though peers in Paris and Frankfurt closed higher.

Interest rate-related angst, which hurt the mood at the start of the day, eased in the afternoon after a weaker US jobless claims reading strengthened the case for a Federal Reserve pause.

There were surprise rate hikes from the Bank of Canada and Reserve Bank of Australia this week, with decisions from the Fed and European Central Bank to come next week. The ECB reports after data showed the eurozone economy has fallen into recession.

The FTSE 100 index closed down 24.60 points, 0.3%, at 7,599.74 on Thursday. The FTSE 250 ended down 44.72 points, or 0.2%, at 19,107.55. The AIM All-Share closed just 0.15 of a point lower at 792.90.

The Cboe UK 100 ended down 0.3% at 758.22, the Cboe UK 250 closed down 0.2% at 16,685.09, though the Cboe Small Companies ended up 0.4% at 13,863.03.

In Europe, the CAC 40 in Paris ended up 0.3%, and the DAX 40 in Frankfurt added 0.2%.

In New York, the Dow Jones Industrial Average was up 0.3%, the S&P 500 added 0.4% and the Nasdaq Composite climbed 0.8%.

"US markets have moved higher on hopes that the Fed will opt to leave its hiking campaign on pause for longer, after jobless claims came in weaker than expected," IG analyst Chris Beauchamp commented.

"Much now hangs on what the Fed says and does next week, and will see increasingly hesitant trading in stocks as the decision nears."

New claims for unemployment insurance in the US rose in the most recent week, the Department of Labor reported.

According to the Department of Labor on Thursday, initial claims for unemployment support in the week ended June 3 totalled 261,000, an increase of 28,000 from the previous week's revised level. The previous week's level was revised up by 1,000 to 233,000 from 232,000.

The four-week moving average was 237,250, an increase of 7,500 from the previous week's revised average. The previous week's average was revised up by 250 to 229,750 from 229,500.

The dollar moved lower in the wake of the data. The pound was quoted at USD1.2541 late Thursday in London, firm from USD1.2459 at the equities close on Wednesday. Against the yen, the dollar was trading at JPY139.05, lower compared to JPY139.85.

The Fed will announce its rate decision on Wednesday next week. According to the CME FedWatch Tool, markets see a 73% chance of the Fed holding interest rates steady next week.

The eurozone fell into recession in the first quarter of this year, according to revised figures from Eurostat.

Seasonally adjusted gross domestic product decreased by 0.1% in the first quarter from the fourth quarter of last year, after Eurostat revised down a forecast from May, which had estimated slight growth.

For the fourth quarter of 2022, eurozone GDP was similarly revised down to negative 0.1%, from a previous estimate of flat on the third quarter. This means eurozone GDP has contracted for two consecutive quarters, which is the definition of a recession.

The euro stood at USD1.0774 late Thursday, higher against USD1.0705 at the London equities close on Wednesday.

In London, Vodafone fell 5.4%, the worst blue-chip performer.

The stock finished 2.3% higher on Wednesday, amid a report by Reuters that the telecommunications provider is in the final stage of agreeing to merge its UK operations with Hong Kong conglomerate CK Hutchison. According to Reuters, an announcement is expected as soon as Friday.

Vodafone shares returned gains on Thursday, however, with its shares going ex-dividend. It means new buyers will not qualify for the latest payout.

Grocer Sainsbury's fell 3.8% and advertising firm WPP lost 2.6%. They also went ex-dividend.

Crest Nicholson dropped 7.4%. The housebuilder swung to a pretax profit of GBP28.4 million for the half-year ended April 30, from a loss of GBP52.2 million at the same point last year.

However, revenue fell to GBP282.7 million from GBP364.3 million the prior year, and home completions dropped by 18% to 894 from 1,096 the previous year. The company said this reflected the economic uncertainty and lower confidence in the housing market.

FirstGroup soared 14% after it trebled its total dividend despite reporting a lower annual profit.

The public transport provider declared a final dividend of 2.9 pence per share, up from 1.1p per share a year ago. This brings the total dividend to 3.8p for financial 2023, more than tripled from 1.1p a year prior.

This was despite pretax profit in the year ended March 25 falling sharply to GBP128.7 million from GBP654.1 million the year prior, and revenue dropping 15% to GBP4.76 billion from GBP5.59 billion.

"Better than expected results reflected a clear marginrecovery in Bus and surprising strength in Rail, within the Open Access and ancillary service areas. Net cash was also better than we had forecast, with the dividend also well ahead of our assumptions and the share buyback plan extended by GBP115 million," analysts at Liberum commented.

Costain shares plunged 13% after it was removed from a UK infrastructure project.

It agreed with National Highways that its involvement in the A66 Northern Trans-Pennine upgrade project "will come to an organised and managed end".

"Costain is one of four parties involved in the A66 and this project was included in our preferred bidder book and therefore this decision has no impact on the group's order book," the company said.

"Costain continues to bid on a number of significant projects across the group. Costain confirms that it will continue to work on the A12 Chelmsford to A120 widening project, supporting the delivery of the project's development consent order application and delivering a package of enabling works for the scheme. We will continue to bring our innovation and expertise to other critically important National Highways projects. The board remains confident of delivering full year results in line with its expectations."

Brent oil was quoted at USD76.28 a barrel at the time of the London equities close on Thursday, down from USD77.24 late Wednesday. Gold was priced at USD1,966.33 an ounce, up against USD1,954.11.

Friday's economic calendar has inflation data from China overnight.

The local corporate diary has annual results from real estate investment trust Industrials REIT, which recently agreed to a takeover by Blackstone. Kidney health-focused diagnostics company Renalytix reports third-quarter results.

By Eric Cunha, Alliance News news editor

Comments and questions to [e-mail]

Copyright 2023 Alliance News Ltd. All Rights Reserved.