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    17:10pm 14th November 2017

    LONDON MARKET CLOSE: Miners Weigh On FTSE 100 Amid Weak China Data

    LONDON (Alliance News) – Stocks in London ended mixed on Tuesday, with sterling recovering after seeing a sharp fall following UK inflation data, with substantial gains made by the likes of Tesco and Vodafone not enough to prevent mining stocks from dragging the blue-chip index into negative territory.

    The FTSE 100 index closed down 0.76 point at 7,414.42. The FTSE 250 ended up 0.3%, or 58.69 points, at 19,846.60, and the AIM All-Share closed down 0.4%, or 4.10 points, at 1,023.21.

    The BATS UK 100 ended down 0.1% at 12,590.45, the BATS 250 closed up 0.4% at 18,040.08, and the BATS Small Companies ended 0.5% lower at 12,500.18.

    While Tesco cheered approval from regulators for its GBP3.70 billion takeover of wholesaler Booker Group, and Vodafone raised its full year guidance after growing profit in the first half, miners suffered heavy losses on slower industrial production growth in China.

    “One of the main drivers of UK trading was the commodity sector. Brent crude fell 1.1% on increased output in the US, while copper plunged 2% as China’s manufacturing production slipped. This all sparked a 2.5% to 3% dive from the likes of Rio Tinto, Anglo American and BHP Billiton,” said Spreadex analyst Connor Campbell.

    Tesco ended the session as the best blue-chip performer closing up 6.7% after the supermarket chain’s GBP3.70 million takeover of food wholesaler Booker Group was given the green light by the UK Competition & Markets Authority.

    Tesco agreed in January to buy Booker in a cash and stock deal, a move that would potentially bring significant savings for the grocery chain. The CMA provisionally concluded Tesco’s purchase of Booker does not raise competition concerns.

    “Crucially this allows Tesco to also dominate the wholesale sector, providing entry into the catering sector, while the total Tesco & Booker sales figure will account for 70% of the wholesale market,” said IG Group analyst Josh Mahony. Booker shares closed up 6.8%, among the best midcap performers.

    Vodafone Group ended 5.6% higher after the telecommunications giant said its profit expanded significantly and hiked both its dividend and full-year expectations.

    For the six months ended September 30, pretax profit rose to EUR2.16 billion from EUR1.39 billion the year prior. Vodafone hiked its interim dividend 2.1% to 4.84 euro cents from 4.74 cents the year before. This was consistent, the company said, with its intention to grow the full-year dividend per share annually.

    Vodafone said it now expected full year organic adjusted earnings before interest, tax, depreciation and amortisation to be around 10%. Previously the company had expected growth to be between 4% to 8% for the full year.

    At the other end of the large-cap index, miners were among the worst performers, after disappointing data from China.

    Glencore, closed down 3.0%, Anglo American, down 2.9%, Rio Tinto, down 2.7%, Antofagasta, down 2.7%, BHP Billiton, down 2.5%.

    China’s industrial production and retail sales growth decelerated in October and property investment cooled, as measures taken to curb excessive debt and factory pollution weighed on activity.

    Industrial production grew 6.2% year-on-year in October, but slower than the 6.6% expansion seen in September, data from the National Bureau of Statistics showed. This was also weaker than the expected growth of 6.3%.

    Gold was quoted at USD1,278.12 an ounce at the London equities close against USD1,277.55 at the London equities close Monday.

    Meanwhile, Brent oil was lower and quoted at USD62.45 a barrel at the London equities close compared to USD63.41 at the London equities close Monday.

    “Brent Crude oil is in the red after the International Energy Agency cut its forecast for global demand. That same report stated the US will become the global leader on oil and gas production by 2025 – because of shale producers. This update prompted heavy selling in the energy market as oil price hit 28 month highs not long ago, and traders jumped at the opportunity to lock in profits,” CMC’s Madden noted.

    In economic news, UK inflation held steady at the strongest level in more than five years in October as higher cost of food was offset by cheaper motor fuel prices.

    The pound, sank to an intraday low of USD1.3073 after data showed UK inflation missed analyst expectations, but was firm against the dollar at USD1.3127 at the London equities close, compared to USD1.3110 at the close Monday.

    Consumer prices climbed 3% year-on-year in October, the same pace as seen in September, the Office for National Statistics reported Tuesday. Inflation was expected to accelerate to 3.2%.
    The 3% inflation was the highest figure since March 2012.

    In its latest Inflation Report, the Bank of England had projected inflation to peak at 3.2% in October, before starting to fall back.

    As inflation remained at 3%, the central bank Governor Mark Carney was spared from writing a letter to the Chancellor explaining the reasons why inflation exceeded the 2% target by one percentage point.

    “With the figure not exceeding the 1.0% parameter above the bank’s 2% threshold that would require the ignominy of an open letter to the Chancellor it is safe to say Governor Carney will be quietly pleased with the data point and hope that the rise in inflationary pressures have begun to wane,” said XTB analyst David Cheetham.

    “Cost of living is still too high and contributing towards a sustained squeeze for consumers. October’s poor retail sales have shown that shoppers are already feeling the pinch both for necessities and luxuries. This means that there could be a knock-on effect for retailers, particularly in the run up to Christmas,” Robert Gordon chief executive of Hitachi Capital UK noted.

    In Paris the CAC 40 ended down 0.4%, while the DAX 30 in Frankfurt ended down 0.2%.

    The euro was higher versus the greenback USD1.1752 at the European equities close, against USD1.1661 the prior day following the release of macroeconomic data from the Eurozone and Germany.

    The euro area economy expanded at a slightly slower pace, as initially estimated, in the third quarter, flash data from Eurostat showed.

    Gross domestic product grew 0.6% sequentially, slightly slower than the 0.7% expansion seen a quarter ago. On a yearly basis, economic growth improved to 2.5% from 2.3% in the previous period.

    In addition, the German economy bounded ahead at a stronger-than-forecast pace in the third quarter as its growth rate headed toward its best performance in six years.

    Powered by a gain in exports and investment, Europe’s biggest economy expanded by 0.8% in the three months ended September compared with the second quarter when it grew by 0.6%, the German statistics office Destatis said.

    Gross domestic product accelerated to 2.8% in the third quarter when compared with the same period last year – up from 2.3% in the three months ended June.

    Germany’s impressive economic performance is likely to give fresh ammunition to those calling on the European Central Bank to speed up plans to scale back its monetary stimulus measures.

    The ECB’s moves have been complicated by German inflation, which edged lower to 1.6% in October from 1.8% in September amid weaker energy prices.

    Returning to London, GoCompare Group made a late surge to end up 10% at 102.0p, valuing the firm at GBP426.7 million – after the comparison site operator said it turned down an unsolicited approach that valued the firm at about GBP460.2 million from the owner of sites such as Zoopla and USwitch, ZPG, last week.

    GoCompare said the proposal envisaged an offer at 110.0 pence per share, which “fundamentally undervalies” the company since being spun-off from eSure Group only one year ago. ZPG, which ended flat, is now “considering its position”.

    Shire closed up 2.0% after the Irish drugmaker was raised to Buy from Hold by Liberum.

    The broker said the stock now appears attractive following a substantial share price decline, and ongoing concerns over hemophilia treatments have now been discounted from the valuation.

    ITV closed down 2.2% after the broadcaster reported total external revenue was down 1.0% in the nine months to September 30 to GBP2.13 billion from GBP2.16 billion posted in the same period last year.

    ITV said this was partly due to a decline in Family net advertising revenue of 7.0% to GBP1.12 billion from GBP1.21 billion. Revenue for ITV Broadcast & Online fell 4.0% to GBP1.47 billion from GBP1.54 billion, whilst revenue for ITV Studios was up 9.0% to GBP1.01 billion from GBP923.0 million the same period last year.

    In the FTSE 250, Intermediate Capital Group ended as the best performer, up 9.3% after the specialist money manager raised more funds than anticipated to push its amount of assets under management at the end of the first half well ahead of expectations, shrugging off a sharp a drop in profit.

    ICG said fundraising added EUR5.70 billion in the half to the end of September, with EUR4.2 million of that raised for its Senior Debt Partners strategy. ICG also substantially raised its dividend for the half by 20% to 9.0 pence from 7.5 pence.

    Computacenter closed up 7.7% after the IT infrastructure firm said it expects to report 2017 results “comfortably in excess of previous expectations”, and highlighted a strong start to its fourth quarter and a growing pipeline for the rest of the year.

    Computacenter said it would not be launching a tender offer for its shares in its fourth quarter as it had flagged it would do in its interim results in August.

    McCarthy & Stone closed up 7.0% after the retirement housebuilder posted a rise in revenue and strong forward sales for its most recent financial year.

    Revenue for the year rose by 4.0% to GBP660.9 million from GBP635.9 million, with the company experiencing a strong forward order book going into the current year. Forward sales are up 11% as at November 10 at GBP277.0 million from GBP250.0 million.

    At the other end of the midcap index, FirstGroup ended as the worst performer down 5.6% after the transport operator said it swung to a pretax loss for the first half of its financial year as it felt the effects of hurricanes in Puerto Rico.

    FirstGroup swung to a statutory loss of GBP1.9 million for the half-year ended September 30 from a profit of GBP11.1 million last year. Profit was hit by a severe impact from the series of hurricanes which hit the Caribbean and southern US in August and September, with the First Transit division suffering due to the subsequent shutdown of operations in Puerto Rico.

    Stocks in New York were lower at the London equities close. The DJIA was down 0.6%, the S&P 500 index down 0.5% and the Nasdaq Composite down 0.5%.

    US President Donald Trump wrapped up a tour of Asia in the Philippines on Tuesday by boasting of his “really fantastic job” in pushing for fairer trade deals and of rekindling ties with an old ally.

    “It’s been a really great 12 days, and I made a lot of great friends,” he told reporters as they flew together out of Manila, where he attended a leaders summit of the Association of South-East Asian Nations. “I think we have done a really fantastic job.”

    Trump said he made “a lot of progress” in pressing for fair and reciprocal trade deals with other countries.

    Aside from trade, Trump said the trip was also “really good” in getting Asia-Pacific countries together for a tougher position against North Korea’s nuclear weapons programme and missile tests. In a draft statement, East Asian countries called on Pyongyang to abandon its nuclear and ballistic missile technologies and immediately and fully comply with United Nations’ resolutions.

    The economic calendar on Wednesday there is French inflation readings at 0745 GMT, UK unemployment data at 0930 GMT and US retail sales and inflation figures at 1330 GMT.

    In the UK corporate calendar on Wednesday there are half year results from credit checking agency Experian and from home phone and broadband provider TalkTalk Telecom Group. There are also trading statements from housebuilders Crest Nicholson and Barratt Developments, with the latter also holding its annual general meeting.

    By Arvind Bhunjun; arvindbhunjun@alliancenews.com; @ArvindBhunjun

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