London close: Markets end mixed as sentiment wavers

London stocks were in a mixed state at the close on Thursday, as earlier sentiment - underpinned by a dovish statement from the Federal Reserve and solid results from the likes of Shell and Diageo - faded in the session’s final hours.

The FTSE 100 ended the day up 0.39% at 6,968.85, while the pound was 0.14% higher against the dollar at 1.3134 and 0.38% against the euro at 1.1469, even as the European Union rejected PM Theresa May's calls to reopen Brexit negotiations.

Meanwhile, the FTSE 250 finished down 0.62% at 18,711.75.

Michel Barnier, the EU's chief Brexit negotiator, said the Irish backstop was "part and parcel" of the Brexit deal and cannot be renegotiated.

Foreign Secretary Jeremy Hunt said on Thursday that extra time may be needed to finalise Brexit legislation, meaning the exit date may have to be pushed back.

His comments came as the government said Parliament's week-long February recess looked set to be cancelled.

While Westminster was blowing hot and cold, financial market sentiment was fired up by a more dovish than expected statement from the US Federal Reserve, which left interest rates on hold at between 2.25% and 2.5% on Wednesday, as expected.

Market participants took comfort from the fact the Fed dropped the phrase "further gradual increases" in relation to rate hikes from its statements.

They also welcomed Powell's patient wait-and-see policy and acknowledgement that the case for higher rates has weakened.

"Only last month the Fed had raised rates and hinted that two more moves could follow this year," said strategists at Rabobank.

"While last night’s change of direction had been heralded by more accommodative comments from various Fed officials in the past few weeks, the abruptness of the change of direction still took the market by the surprise."

On home shores, meanwhile, the latest survey from Nationwide showed house prices rose by 0.3% month-on-month in January, a touch above consensus expectations for a 0.2% increase and following a 0.7% drop the month before.

On the year, prices were up 0.1%, better than the flat reading expecting but down from 0.5% growth seen a month earlier.

“The uncertainty created by Brexit largely is responsible for the further decline in year-over-year growth in house prices to near-zero, from a broadly stable rate of about 2% in the 18 months before November,” said analysts at Pantheon Macroeconomics.

Elsewhere, the latest UK consumer confidence survey from GfK showed no change in January, with the index remaining at -14 as consumers adopt a wait-and-see approach amid Brexit uncertainty.

The survey also revealed that consumers were the least optimistic they have been about the outlook in seven years, with the index for the general economic situation over the next 12 months at -39, getting close to the levels seen at the end of 2008 and early 2009.

“This is unsurprising given that consumers, companies and corporations thrive on certainty, which is in short supply just two months before the planned date for the UK’s EU-exit,” said Joe Staton, client strategy director at GfK.

“The next few months promise to be turbulent for the consumer so will this measure for the economic outlook in the coming year drop even further?”

In corporate news, Royal Dutch Shell was the standout gainer as it posted a 36% jump in full-year earnings and a 32% increase in fourth-quarter earnings.

The oil colossus benefited from higher realised oil, gas and liquefied natural gas prices and cost cutting, with its shares finishing up 3.78%.

Elsewhere in the sector, BP, Tullow and Premier were also in the green, by 1.70%, 2.09% and 1.51% respectively.

“Every other quarterly set of figures for 2018 saw Shell come in short of expectations - but not this time,” said Russ Mould, investment director at AJ Bell.

“The company’s main measure of profit beat consensus and even came in ahead of the third quarter number - buoyed in particular by its refining, marketing and integrated gas operations.

"This is testament to the progress Shell has made in becoming a more efficient operation, particularly when you consider the average oil price in the fourth quarter was around $64 compared with $73 in the third quarter.”

Drinks giant Diageo rallied by 4.67% as it said first half net sales rose 5.8% to £6.9bn, with organic growth partially offset by unfavourable exchange rates.

Reported operating profit of £2.4bn was up 11.0%, driven by organic growth, while pre-tax profits were up to £2.6bn from £2.2bn.

“These figures show the underlying strength of Diageo, with good growth across the board, despite a volatile macroeconomic backdrop,” said Steve Clayton, manager of the HL Select funds, which invest in Diageo.

Iron ore pellet producer Ferrexpo racked up stellar gains of 11.76% as it was boosted by a double-upgrade to 'buy' at Bank of America Merrill Lynch.

Plastic packaging supplier RPC Group was trading up by 3.68% as US plastics giant Berry Global said it was thinking of making an offer for the group.

That came after US private equity firm Apollo finally made a final offer to buy the company at 782p a share in cash last week.

United Utilities, Severn Trent and Pennon were all on the leaderboard by 1.34%, 2.54% and 0.61% respectively as their new business plans were given fast-track status by regulator Ofwat.

On the downside, Standard Life Aberdeen was hit hard by a downgrade to 'equalweight' by Morgan Stanley, falling 5.06% as analysts argued that the risk/reward was less attractive, with new estimates for the group around 20% below consensus.

BT slipped 0.68% after releasing a mixed set of third-quarter results, with revenue and EBITDA beating consensus by around 1% and 3% respectively, but headwinds in the consumer segment, where the telecoms giant is taking a hit from competition from Vodafone.

The stock was also knocked lower by a downgrade to 'neutral' by Merrill.

Unilever was in the red by 1.99% as it churned out underlying sales growth at the bottom end of its guidance for 2018 after growth at the Marmite and Ben & Jerry's maker slowed in the fourth quarter.

New boss Alan Jope said he expects market conditions in 2019 to "remain challenging".

Market Movers

FTSE 100 (UKX) 6,968.85 0.39%
FTSE 250 (MCX) 18,711.75 -0.62%
techMARK (TASX) 3,373.79 0.44%

FTSE 100 - Risers

Diageo (DGE) 2,901.50p 4.67%
Antofagasta (ANTO) 870.80p 4.59%
Royal Dutch Shell 'A' (RDSA) 2,362.00p 3.78%
Royal Dutch Shell 'B' (RDSB) 2,368.50p 3.63%
Fresnillo (FRES) 1,005.00p 3.31%
Severn Trent (SVT) 1,998.50p 2.54%
Scottish Mortgage Inv Trust (SMT) 483.20p 2.44%
Evraz (EVR) 498.20p 2.34%
Anglo American (AAL) 1,939.80p 2.15%
British American Tobacco (BATS) 2,685.50p 2.03%

FTSE 100 - Fallers

Smurfit Kappa Group (SKG) 2,192.00p -5.60%
Standard Life Aberdeen (SLA) 251.65p -5.06%
TUI AG Reg Shs (DI) (TUI) 1,154.00p -3.39%
DCC (DCC) 6,225.00p -3.11%
Smith (DS) (SMDS) 337.50p -3.05%
Kingfisher (KGF) 222.40p -2.97%
Standard Chartered (STAN) 613.90p -2.88%
ITV (ITV) 129.45p -2.82%
RSA Insurance Group (RSA) 512.80p -2.73%
SEGRO (SGRO) 647.00p -2.44%

FTSE 250 - Risers

Ferrexpo (FXPO) 258.40p 11.76%
Rank Group (RNK) 162.00p 8.29%
Renishaw (RSW) 4,670.00p 7.01%
Hochschild Mining (HOC) 188.85p 4.68%
Acacia Mining (ACA) 194.25p 4.10%
Bakkavor Group (BAKK) 147.80p 4.08%
RPC Group (RPC) 795.00p 3.79%
Just Group (JUST) 101.40p 3.52%
Dechra Pharmaceuticals (DPH) 2,370.00p 3.49%
Sophos Group (SOPH) 337.20p 2.99%

FTSE 250 - Fallers

Metro Bank (MTRO) 1,087.00p -11.12%
Contour Global (GLO) 168.00p -6.67%
Vivo Energy (VVO) 129.90p -6.14%
Greencore Group (GNC) 193.00p -5.85%
IP Group (IPO) 106.00p -5.69%
Riverstone Energy Limited (RSE) 1,050.00p -4.89%
FDM Group (Holdings) (FDM) 826.00p -4.84%
Victrex plc (VCT) 2,291.96p -4.82%
CYBG (CYBG) 175.80p -4.40%
Dixons Carphone (DC.) 137.95p -4.23%