Pound pummels FTSE, results roil mid caps

  • Markets
  • Wednesday, 14 Mar 2018

The FTSE ended down 1.1 percent at 7,138.78 points, while the mid cap index fell 1.3 percent.

The FTSE ended down 1.1 percent at 7,138.78 points, while the mid cap index fell 1.3 percent.

LONDON/MILAN: Britain's top share index succumbed to gains in the pound on Tuesday after U.S. President Donald Trump fired Secretary of State Rex Tillerson, while disappointing earnings updates weighed on mid caps.

The FTSE ended down 1.1 percent at 7,138.78 points, while the mid cap index fell 1.3 percent.

Trump replaced Tillerson with loyalist CIA Director Mike Pompeo which, together with U.S. inflation data, weighed on the dollar.

That boosted sterling to a two-week high, hitting the FTSE's international earners, in particular big consumer staples.

"Rex Tillerson being replaced by the director of the CIA, that's come as a shock to the market and it's sent cable higher which has suppressed the FTSE 100 throughout the day," Jasper Reimers, senior analyst at Vertex Capital Group, said.

"Rex Tillerson was the mediator in a lot of foreign policy issues, so with him now out of the picture, it looks as though Trump's agenda might be far easier to drive in."

A half-yearly update on Britain's economy from Chancellor of exchequer Philip Hammond also helped keep the pound firm as he raised his growth forecasts slightly.

Mid cap Greencore's <GNC.L> shares plunged after the food manufacturer cut its 2018 profit guidance due to issues at its US business.

Investec placed its forecasts and price target under review, noting that even though commercial developments gave the group confidence that the financial performance will improve through into 2019, this was later than management had expected.

Greencore <GNC.L> was down more than 30 percent, the biggest faller among mid caps and the stock's biggest one-day loss ever.

Still among mid caps, TC ICAP <TCAPI.L> fell 10.5 percent after annual profits at the world's largest interdealer broker fell short of analyst expectations.

"We believe various additional costs associated with MiFID II and ongoing investment account for the shortfall," Liberum said in a note.

On the FTSE, Antofagasta <ANTO.L> rose 3 percent following a well-received trading update.

The Chilean miner reported a sharp rise in full-year earnings thanks to higher copper prices and said it would raise its dividend 177 percent.

Tonic water maker Fevertree Drinks <FEVR.L> fell 3.6 percent after hitting a record high in the previous session as a 64 percent jump in full-year core earnings failed to excite investors.

Reuters also reported sepaerately:

The pan-European STOXX 600 <.STOXX> ended the session down 1 percent with Frankfurt's DAX <.GDAXI> and its German exporter constituents taking the worst hit, down 1.6 percent.

The euro zone currency, a rise in which typically hurts European blue-chip companies, climbed about 0.5 percent against the dollar on Tuesday.

"There is the Tillerson effect and there's the euro-dollar effect," said Oddo Securities trader Mikael Jacoby, noting that investors probably saw Tillerson's removal as a good reason to take some profits after six trading days of gains.

The departure of Gary Cohn as President Donald Trump's top economic adviser and worries about a possible global trade war had already sent jitters through global financial markets.

"What we are seeing here is that those people in the U.S. administration in the more moderate line of thinking are being ousted, so this adds to the concerns the more radical forces are gaining some ground," said Rabobank's head of macro strategy Elwin de Groot.

The utilities sector retreated 0.25 percent retreat, with losses limited by demand for German utilities RWE <RWEG.DE> and E.ON <EONGn.DE> as they plan to divide up the assets of power firm Innogy <IGY.DE>.

E.ON <EONGn.DE> got a further boost and posted the second best-performance of the STOXX 600, up 3.9 percent after it said it would raise its dividends for 2018 and 2019.

French telecoms company Iliad fell 9.9 percent after missing market forecasts due to losses related to its launch in Italy.

Iliad's rival Orange <ORAN.PA>, the dominant French telecoms company, returned to growth last year for the first time since 2009 after spending heavily to roll out high-speed broadband.

Struggling South African retailer Steinhoff <SRRJ.J> saw its Germany-listed shares rise 2.1 percent after it cut its stake in KAP Industrial <KAPJ.J> as it tried to plug a liquidity gap.

Veolia <VIE.PA> fell 2.4 percent, the top faller on France's CAC 40, after the Qatari government sold its 4.6 percent stake in the utility group.

A weaker full-year outlook sent chemicals group Wacker Chemie <WCHG.DE> down 6.6 percent. The firm said sales would slow due to currency pressures.

Overall European company results have been encouraging. Investors said European earnings had further room to grow as they were still lagging those in the United States.

"The European market isn't pricing in quite as much as the U.S. is, and it's in a more favourable part of the business cycle," said Rothschild's Gardiner.

"We are aware that it's a pretty crowded story, but we still think it's very attractive." - Reuters

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