London midday: Stocks extend losses as WPP weighs; Powell testimony eyed again

London stocks had extended losses by midday on Thursday, dragged lower by disappointing results from advertising giant WPP as investors digested mixed data releases and looked ahead to another testimony by new Federal Reserve Chair Jerome Powell.

The FTSE 100 was down 0.7% to 7,180.10, while the pound was flat against the euro at 1.1280 and down 0.1% against the dollar at 1.3733.

Sterling was down at around a six-week low after Prime Minister Theresa May rejected the EU’s latest draft text on the Irish border issue, which stated that in the absence of any agreement to the contrary, Northern Ireland stays in a customs union after Brexit and is subject to all EU rules and regulations. The text also left out any reference to an extended transition period, which the UK has requested.

IG analyst Chris Beauchamp said: "The EU’s insistence on a border between Northern Ireland and the rest of the UK would seem to be a classic case of overreach from Brussels - backing the UK into a corner plays well with the bureaucracy, but does it really serve the cause of either side? So long as such disagreement persists we may see further losses for the pound.

"Yet again a late sell-off in the US has put UK and European markets to flight, with sentiment soured by WPP’s dire earnings this morning. Sentiment seems extremely fragile at present, with investors alternating between rampant optimism and unbridled pessimism. The latter seem to hold sway this morning, especially with more Powell testimony on the way this afternoon."

All eyes will be on Powell again on Thursday when the Fed chair testifies before the Senate Banking Committee, with any further talk about an overheating economy likely to give equity market bears another reason to dump stocks.

UK manufacturing data did little to lift the mood, as it showed 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.

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.

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, 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, while steel producer Evraz gained as it said full-year profits increased 70% on the back of higher prices.

Fashion brand Burberry rallied as investors welcomed the appointment of former Givenchy man Riccardo Tisci as its new chief creative officer, as long-time head honcho Christopher Bailey bows out at the end of the month.

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.

Madame Tussauds owner 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) 7,180.10 -0.72%
FTSE 250 (MCX) 19,540.56 -0.75%
techMARK (TASX) 3,315.71 -0.06%

FTSE 100 - Risers

Evraz (EVR) 455.30p 6.60%
Burberry Group (BRBY) 1,632.00p 6.42%
Shire Plc (SHP) 3,183.00p 2.38%
Admiral Group (ADM) 1,875.50p 1.76%
CRH (CRH) 2,438.00p 1.50%
International Consolidated Airlines Group SA (CDI) (IAG) 621.69p 1.15%
Taylor Wimpey (TW.) 187.55p 0.83%
United Utilities Group (UU.) 671.20p 0.75%
Smith & Nephew (SN.) 1,277.00p 0.67%
Just Eat (JE.) 882.80p 0.66%

FTSE 100 - Fallers

WPP (WPP) 1,189.44p -14.67%
Rentokil Initial (RTO) 273.50p -5.56%
ITV (ITV) 154.65p -3.34%
Rio Tinto (RIO) 3,795.00p -3.34%
Kingfisher (KGF) 348.80p -2.54%
Sage Group (SGE) 676.46p -2.33%
Fresnillo (FRES) 1,191.50p -2.30%
Mondi (MNDI) 1,860.00p -2.21%
RSA Insurance Group (RSA) 618.00p -2.12%
Micro Focus International (MCRO) 2,020.00p -2.08%

FTSE 250 - Risers

Merlin Entertainments (MERL) 378.60p 11.35%
Cobham (COB) 124.25p 9.52%
Howden Joinery Group (HWDN) 476.40p 7.27%
Vesuvius (VSVS) 614.00p 3.98%
Hunting (HTG) 632.50p 3.94%
Elementis (ELM) 300.20p 2.88%
Bovis Homes Group (BVS) 1,068.00p 1.67%
Ferrexpo (FXPO) 317.80p 1.63%
Drax Group (DRX) 252.20p 1.45%
Marshalls (MSLH) 422.80p 1.44%

FTSE 250 - Fallers

Aveva Group (AVV) 1,849.00p -35.93%
Ultra Electronics Holdings (ULE) 1,462.00p -8.05%
Hastings Group Holdings (HSTG) 289.20p -7.49%
IP Group (IPO) 108.40p -5.57%
Capita (CPI) 166.98p -5.21%
AA (AA.) 75.76p -4.70%
Petrofac Ltd. (PFC) 430.72p -4.69%
Hikma Pharmaceuticals (HIK) 830.00p -3.67%
Galliford Try (GFRD) 886.00p -3.49%
BCA Marketplace (BCA) 160.20p -2.91%