London close: Fed hawks and Chinese data send Footsie lower

More hawkish remarks than usual from two US rate-setters, alongside hard-to-read Chinese credit statistics took markets lower on Thursday.

The president of the US Federal reserve bank of St.Louis, James Bullard, and the Richmond Fed's Jeffrey Lacker said that the US central bank could conceivably see itself forced to raise interest rates at a faster pace than markets might be expecting.

So-called aggregate financing in Asia’s largest economy, the widest measure of new credit, came in at 476.7bn yuan for October, the least in 15 months, and left analysts divided in its wake.

FTSE 100 finished down 118.52 points to 6,178.68.

Three month copper futures on the LME slid 2% to $4,838 per metric tonne. Oil futures continued their recent leg lower, giving back about 3% in late afternoon trading, following the most recent US government stockpiles data.

On a more positive note, European Central Bank president Mario Draghi began his testimony before the European parliament’s economic and monetary affairs committee.

Draghi said the normalisation of inflation might take longer than had been envisaged, implying that new stimulus might yet be forthcoming. He said the ECB had always been clear that quantitative easing could run past the September 2016 deadline if its inflation target was at risk of being compromised.

His remarks weighed on the single currency, which fell promptly towards the 1.07 mark but later recovered to 1.0796, in a possible 'risk-off' move.

Fed chairwoman Janet Yellen did not comment on monetary policy in her speech.

Back in the UK, house price growth accelerated in October. The Royal Institute of Chartered Surveyors' monthly house price balance jumped to a reading of +49 from +44 in the month before compared with consensus of +45, close to August's 15-month high of +53.

Nonetheless, the chief factor behind rising prices appeared to be the lack of new build.

Bank of England chief economist Andrew Haldane said the case for raising interest rates was still some way from being decided.

FTSE 100: Rolls Royce warns, one broker fears Pearson will be next

Aerospace and engineering firm Rolls-Royce said earnings for the year will be at the low end of guidance as it downgraded its expectations for next year and warned of a possible cut to the dividend. The company reaffirmed its 2015 guidance but said profit for the year is expected to be at the lower of its £1.33bn to £1.48bn range.

Military hardware maker BAE Systems said it was is axing 371 jobs at its military aircraft unit and announced earnings per share for the year would be 38p as its export order book thinned. The company said it was slashing the jobs and slowing the production rate of its Typhoon fighter jet “to ensure production continuity at competitive costs over the medium term”.

Shares in education publisher Pearson fell sharply on Thursday following comments by chief executive officer John Fallon the previous day. Speaking at the Morgan Stanley European Technology, Media and Telecom Conference in Barcelona on Wednesday, Fallon said that when considering a capital allocation, the company’s first priority was to protect the dividend. Bloomberg cited Peel Hunt analyst Alex De Groote as saying that he expects Pearson to issue another profit warning in the next few weeks and then to cut the dividend.

Aviva has hired bankers to explore the possible sale of its Irish health insurance operations, Sky News reported. The broadcaster said it understood that Macquarie had been appointed to undertake the strategic review.

Luxury retailer Burberry posted a rise in first half pre-tax profit but warned the market environment remains challenging. For the six months to the end of September, adjusted pre-tax profit rose to £153m from the same period last year, while revenue was unchanged at £1.1bn. Reported pre-tax profit was up 9% to £155m. In addition, the company said that since the start of the third quarter, comparable sales, although volatile, have improved overall relative to the second quarter.

Interim pre-tax profits at SAB Miller fell to $2.3bn from $2.82bn. Revenues were also down to $9.9bn from $11.3bn. EBITA fell to $2.9bn from $3.2bn. “Continued depreciation of key operating currencies against the US dollar has had an adverse impact on our results on both a translational and transactional basis. The adverse translational foreign exchange impact on EBITA in the period was $497m, with a further adverse transactional impact on margins,” the company said.

BHP was weighed down by a report in The Guardian that the Brazilian government might slap a fine on the Anglo-Australian outfit for the "environmental catastrophe" after a tailings dam part-owned by the firm broke.

FTSE 250: Spire, Morgan Advanced Materials and Grafton warn

Hospital group Spire Healthcare cut its full year revenue guidance as it said revenues from NHS Local contracts continued to decline in the four months to the end of October. The company said it now expects full year revenues to show growth of 3% to 3.7%, or between £882m and £888m, down from previous guidance of 4% to 6% or £890m to £907m.

IMI slumped on Thursday after the engineering company said it expects adjusted earnings for the year to be towards the lower end of the range of current market estimates amid challenging market conditions.

Shares in Morgan Advanced Materials slumped early on Thursday, after the carbon products and ceramic manufacturer warned its full year earnings will be at the low end of expectations, due to a challenging market environment.

Grafton Group has cut its operating profit outlook for the full year due to persistent tough conditions in the Belgian and UK markets. The builders’ merchant and DYI specialist said ongoing weakness in its Belgium operations has forced it to cut its operating profit expectations for 2015 by between 3% and 4%, as volume and margins have suffered in the region.

Bus and train operator Firstgroup posted a 33% drop in first-half pre-tax profit as revenue fell due to the loss of certain rail franchises and a later than normal start to this school year for US students. For the six months to the end of September, adjusted pre-tax profit came in at £22.4m from £33.3m in the same period last year, on revenue of £2.44bn, down 17%.

Market Movers

FTSE 100 (UKX) 6,178.68 -1.88%
FTSE 250 (MCX) 16,869.50 -1.36%
techMARK (TASX) 3,074.00 -1.03%

FTSE 100 - Risers

BAE Systems (BA.) 455.00p 3.81%
BT Group (BT.A) 481.65p 1.30%
National Grid (NG.) 916.00p 1.01%
Direct Line Insurance Group (DLG) 403.00p 0.52%
Sage Group (SGE) 540.00p 0.28%
TUI AG Reg Shs (DI) (TUI) 1,169.00p -0.17%
ARM Holdings (ARM) 1,051.00p -0.19%
SSE (SSE) 1,441.00p -0.21%
United Utilities Group (UU.) 936.50p -0.21%
Kingfisher (KGF) 352.90p -0.25%

FTSE 100 - Fallers

Rolls-Royce Holdings (RR.) 536.50p -19.57%
Anglo American (AAL) 449.90p -8.70%
Glencore (GLEN) 95.92p -7.64%
Pearson (PSON) 774.00p -5.49%
Smiths Group (SMIN) 933.50p -5.13%
BHP Billiton (BLT) 877.30p -5.02%
Antofagasta (ANTO) 480.80p -4.89%
Royal Dutch Shell 'A' (RDSA) 1,584.50p -4.35%
Royal Dutch Shell 'B' (RDSB) 1,601.50p -4.26%
Sainsbury (J) (SBRY) 243.00p -4.07%

FTSE 250 - Risers

FirstGroup (FGP) 100.00p 2.21%
esure Group (ESUR) 250.30p 1.79%
Tullett Prebon (TLPR) 327.60p 1.46%
Betfair Group (BET) 3,450.00p 1.44%
Wizz Air Holdings (WIZZ) 1,854.00p 1.42%
Moneysupermarket.com Group (MONY) 326.60p 1.33%
Bank of Georgia Holdings (BGEO) 1,896.00p 1.28%
Clarkson (CKN) 2,255.00p 1.17%
Playtech (PTEC) 876.00p 1.04%
Lookers (LOOK) 176.80p 1.03%

FTSE 250 - Fallers

Spire Healthcare Group (SPI) 313.00p -12.93%
Morgan Advanced Materials (MGAM) 233.00p -12.80%
Halfords Group (HFD) 395.00p -8.14%
Nostrum Oil & Gas (NOG) 383.10p -7.93%
IMI (IMI) 899.00p -7.84%
Shawbrook Group (SHAW) 335.00p -7.20%
Genus (GNS) 1,402.00p -6.80%
Ophir Energy (OPHR) 95.55p -6.14%
Rotork (ROR) 175.20p -5.50%
Just Eat (JE.) 433.30p -5.31%