London close: FTSE starts March lower as WPP and ex-divs drag

London stocks staggered lower as Thursday's session went on, dragged lower by disappointing results from advertising giant WPP, mixed economic data and a heavyweight group of stocks going ex-dividend.

The FTSE 100 finished 0.8% lower at 7,175.64, while the pound struggled for direction against the dollar, testing new six-week lows 1.374, and flattered to deceive against the euro, ending down 0.2% at 1.1257.

Sterling was largely lackluste after Prime Minister Theresa May's rejection of the EU’s latest draft text on the Irish border issue the day before. The text also left out any reference to an extended transition period, which the UK has requested.

"European stocks are sliding again, as continued fears over a high interest rate environment continue to plague market sentiment," said IG analyst Joshua Mahony.

"The start of a new month has done little to ease the global stock slide, with the FTSE looking likely to close out a third consecutive negative close."

US stocks were having an up-and-down first half to Thursday's session as Federal Reserve chair Jerome Powell testified in the Capitol for the second time this week. Answering questions from the Senate Banking Committee, Powell said that he expected more wage increases would come as the labour market continued to tighten an saw “no evidence that the economy is currently overheating”.

The yield on 10-year US T-bills were as low as 2.82% and as high as 2.86% at various times over the session. High bond yields have been depressing stocks of late, but there was a slight easing after US headline and core PCE price inflation came in as expected, at up by 1.7% and 1.5% year-on-year respectively.

"The yield on the 10-year US Treasury is still dangerously close to breaking above 3% - a move which could lead to a deeper and more protracted sell-off in equities," said analyst David Morrison at GKFX.

UK manufacturing data did little to lift the mood or the pound, showing growth in the sector slowed slightly in February, with a major fall in the output balance to its lowest level in almost a year.

The IHS Markit CIPS manufacturing purchasing managers' index fell to 55.2 in February from 55.3 in January, which took the index to its lowest level since June 2017, though was not as bad as the 55.0 the market had expected.

Figures on mortgage approvals were cheerier, however, showing a bounce back in January. According to the Bank of England, mortgage approvals rose to 67,478 in January from a one-year low of 61,692 in December.

Earlier, the latest housing market survey from Nationwide showed UK house prices unexpectedly fell in February. House prices were down 0.3% on the month following a 0.8% increase in January, missing expectations of a 0.2% gain. On the year, house prices were up 2.2%, slowing down from a 3.2% jump the month before and well below the 2.6% rise expected.

In corporate news, advertising giant WPP tumbled as it blamed technological disruption and squeezed marketing budgets for flatlining revenue as it reported profit in line with muted market expectations. The world’s biggest advertising company said it made a slow start to 2018, saying advertisers remained under pressure from investors to cut costs.

Rentokil was in the red on the back of slower organic growth, although analysts said its results looked OK at the underlying level.

Hastings tumbled as it reported a 39% jump in 2017 operating profits but gross written premiums disappointed.

Miners were down again, as the strong dollar weighed on metals prices. Rio Tinto and Fresnillo were the biggest fallers in the FTSE 100's commodities heavyweights.

The retail sector was in focus again a day after Maplin and Toys R Us went into administration, with Carpetright losing a quarter of its market value after it issued its second profit warning of the year.

On the upside, Russian steelmaker Evraz was not feeling the cold and marched higher on the back of full-year profits up 70% to $2.6bn, boosted by higher market prices. Revenues were up 40.4% to $10.8bn driven partially by higher volumes but mostly by an upswing in prices for steel and coal products amid more favourable market trends.

Burberry donned its checked scarf and strutted higher after investors liked the cut of its new chief creative officer's jib. The fashion house has appointed Riccardo Tisci, who, under Burberry's CEO Marco Gobetti helped turn around the fortunes at Givenchy.

Asset manager Schroders gained after it posted a 23% jump in full-year pre-tax profit as assets under management and net inflows rose amid growth across the group.

Irish building materials group CRH was trading higher after saying it generated an acceleration in profits growth towards the end of the year and saw good potential for more in the US and Europe in 2018.

FTSE 250 builders’ merchant Grafton Group, which recently acquired specialist decorators’ merchant Leyland SDM for £82.4m, rose as it reported a 15% jump in full-year profit amid record revenue.

BBA Aviation was in the black after saying it swung to a pre-tax profit in 2017, while oilfield services provider Petrofac gushed higher as its full-year core profit beat expectations.

Legoland and Thorpe Park operator Merlin Entertainments racked up strong gains on better-than-expected 2017 core earnings, while aerospace and defence group Cobham surged after posting better-than-expected full-year pre-tax profit.

National Express edged up as it reported a 12% rise in full-year pre-tax profit as revenues increased 6%, while Vesuvius rallied as its full-year revenues came in a touch ahead of expectations.

FTSE 250 housebuilder Bovis Homes, which saw off two takeover approaches last year, was up as it posted a drop in full-year in line with expectations and said it has seen good demand in the first eight weeks of 2018, while Hunting advanced thanks to a small beat on the top line in its 2017 results.

In broker note action, Elementis was upgraded by Jefferies, while ITV was cut to ‘equalweight’ by Barclays, and Card Factory was initiated at ‘hold’ by Berenberg.

Aveva, Barclays, Beazley, Berkeley Group, EasyJet, Hays, RSA Insurance and Rio Tinto were among the companies whose stock went ex-dividend on Thursday.

Market Movers

FTSE 100 (UKX) 7,175.64 -0.78%
FTSE 250 (MCX) 19,551.70 -0.69%
techMARK (TASX) 3,318.01 0.01%

FTSE 100 - Risers

Evraz (EVR) 447.00p 4.66%
Burberry Group (BRBY) 1,596.00p 4.08%
Shire Plc (SHP) 3,215.75p 3.43%
Admiral Group (ADM) 1,879.50p 1.98%
CRH (CRH) 2,445.00p 1.79%
Sky (SKY) 1,372.00p 1.78%
International Consolidated Airlines Group SA (CDI) (IAG) 623.60p 1.46%
United Utilities Group (UU.) 673.80p 1.14%
Severn Trent (SVT) 1,724.50p 1.00%
Smith & Nephew (SN.) 1,277.00p 0.67%

FTSE 100 - Fallers

Rentokil Initial (RTO) 263.50p -9.01%
WPP (WPP) 1,278.50p -8.29%
easyJet (EZJ) 1,601.50p -4.62%
Rio Tinto (RIO) 3,769.00p -4.00%
Ashtead Group (AHT) 2,033.00p -3.83%
Hargreaves Lansdown (HL.) 1,666.50p -3.42%
Mondi (MNDI) 1,840.00p -3.26%
InterContinental Hotels Group (IHG) 4,555.00p -3.06%
Kingfisher (KGF) 347.40p -2.93%
ITV (ITV) 155.40p -2.88%

FTSE 250 - Risers

Hunting (HTG) 674.50p 10.85%
Cobham (COB) 124.85p 10.05%
Merlin Entertainments (MERL) 372.00p 9.41%
Howden Joinery Group (HWDN) 480.30p 8.15%
Vesuvius (VSVS) 623.50p 5.59%
National Express Group (NEX) 362.40p 3.78%
TBC Bank Group (TBCG) 1,616.00p 3.32%
Elementis (ELM) 299.40p 2.60%
Fisher (James) & Sons (FSJ) 1,598.00p 2.30%
Sirius Minerals (SXX) 28.01p 1.85%

FTSE 250 - Fallers

Aveva Group (AVV) 1,810.00p -37.28%
Hastings Group Holdings (HSTG) 275.00p -12.03%
Ultra Electronics Holdings (ULE) 1,480.00p -6.92%
Petrofac Ltd. (PFC) 428.70p -5.13%
BCA Marketplace (BCA) 156.60p -5.09%
Capita (CPI) 167.40p -4.97%
Sophos Group (SOPH) 475.00p -4.70%
Galliford Try (GFRD) 875.00p -4.68%
Man Group (EMG) 164.00p -4.51%
IP Group (IPO) 110.00p -4.18%