Mixed bag of earnings splits the market
A raft of earnings reports saw blue-chips diverge on Thursday, while the miners weighed on the FTSE 100 index following Rio's news
The FTSE 100 index closed down 0.8% or 32.02 points at 4,202.24 but the FTSE 250 index added 0.1% or 5.6 points to 6,501.88.
A flurry of earnings reports meant investors had plenty to keep them busy during the session but the results presented a mixed bag that saw the companies involved end the day in both the top and bottom spots of the FTSE 100.
At close of play, ICAP was the top performer, 7.3% higher at 237.5p, after the interdealer broker issued an interim management statement that appeared robust considering recent developments in the financial sector.
Smith & Nephew was another strong riser, 7.3% firmer at 550.5p on the back of 2008 results that were broadly in line with consensus expectations and revealed the business is in relative health, according to analysts. Charles Stanley said shares in the medical devices group are undoubtedly rated cheaply.
On the flipside, BT Group dropped 7.8% to 97p after warning of the possibility of substantial write-offs at its international business division. BT reported an 80% fall in pretax profits in the third quarter to £113 million, dragged lower by a £198 million drop in EBITDA at6 its Global services division to just £17 million.
And British Land was also out of favour, 5.6% weaker at 456.25p, leading other property peers lower too. The blue-chip commercial property group reported a 13.3% decline in its portfolio value in the third quarter, with net asset value revealing a disappointing 31% fall. British Land accompanied this news with the announcement it is to launch a rights issue in an attempt to raise £740 million to pay down debt.
Land Securities lost 4.7% to 652.5p in sympathy, Liberty International was off 4.2% at 372.25p and mid-cap Brixton fell back 8.1% at 74.25p.
Finally among the main movers, Diageo slipped 3.3% to 877.5p, hit by a reduction in its full-year profit forecast and news of a £200 million restructuring programme. The beverages group lowered its operating profit target for the year to growth of 4-6% from 7-9% previous estimated, blaming Europe’s deteriorating market conditions.
Putting earnings news aside, Rio Tinto was the stock getting the most airtime and the resultant effect on its sector was the main weight on the FTSE 100 index. The diversified miner this morning confirmed what the market had already dared to believe: that it has agreed a strategic partnership with state-owned Chinese aluminium company Chinalco that will see the shareholder inject US$19.5 billion into the Anglo-Australian mining group in return for assets and convertible instruments that could see its stake raised to 18%.
The controversial deal is said to be the largest overseas investment by the Chinese and although it is widely-deemed to significantly alleviate Rio’s debt worries, if not eradicate them, there are concerns the group could struggle to get the deal approved. At the same time, Rio annoucned a 50% slide in net earnings for 2008.
As such, shares in Rio closed down 1.5% at 1,939p, while BHP Billiton lost 2.8% at 1,258p, Antofagasta fell back 2.7% at 296.5p and Anglo American saw 3.9% taken off its market value to 1,324p.
