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FTSE heads for weekly loss as Italy takes toll on BT

Published 28/07/2017, 09:52
© Reuters. People walk through the lobby of the London Stock Exchange in London
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By Helen Reid

LONDON (Reuters) - Britain's major share index slipped, heading for a weaker finish to the week after corporate earnings drove big swings in individual stocks, with BT (L:BT) Friday's biggest faller.

The FTSE 100 (FTSE) fell 0.6 percent, although it outperformed the broader European market. It was heading for a loss of 0.7 percent on the week, its first in a month.

After wild stock moves from pharmaceuticals companies AstraZeneca (L:AZN) and Indivior (L:INDV) on Thursday, trading was more muted, although Astra's dramatic 15 percent drop helped put blue-chips on track for a weekly fall.

"We have had an awful lot of results and on the whole we have been pleasantly surprised they've not been weaker," Eric Moore, UK Equity Income fund manager at Miton Group, said.

"The VIX (volatility index) tells us volatility is low, but if you look at the way shares have reacted on a daily basis after updates, it feels quite volatile," said Moore.

The top faller on Friday was telecoms operator BT (L:BT), down 4.3 percent after its first quarter profit was dented by settlements for an Italian accounting scandal, with government regulation also a concern for investors.

"There's a lot going on in terms of regulatory review. The multi-million dollar question is how much will BT have to spend in capex on broadband investment in the UK, and what return will they be allowed to make from that," Moore said.

Barclays (L:BARC) shares see-sawed before settling up 0.6 percent after the bank reported a 1.2 billion pound first-half loss following a 2.5 billion pound hit from the sale of its Africa business.

"The shares are trading on 0.74 times tangible book [value], which is not hugely demanding, However, for a business making a return on total equity of 6 percent this remains far from attractive," KBW analyst Edward Firth said.

Meanwhile, British Airways owner IAG (L:ICAG) gained 1.3 percent, among the only blue-chips to climb, after reporting better than expected second-quarter profits despite a massive power outage grounding some flights in May.

Alcoholic beverages firm Diageo (L:DGE) added to Thursday's strong gains after robust results and was up 2.1 percent.

Mid-caps (FTMC) underperformed, down 1 percent. Valve maker Rotork (L:ROR) dropped 5.2 percent after the company said CEO Peter France was resigning.

"Rotork is a very high quality, well-loved company and this will leave people scratching their heads," said Moore.

Materials firm Morgan Advanced (L:MGAMM) jumped 3.4 percent to the top of the mid-cap index after its half-year results.

Investors were looking ahead to next week's results which would help paint a picture of the health of the UK economy, with HSBC (L:HSBA) and the major listed supermarkets due to report.

"There's parts of the market that investors are more worried about, like retailers and consumer stocks, that haven't reported yet," Moore said.

© Reuters. People walk through the lobby of the London Stock Exchange in London

"UK consumer confidence data today was pretty horrid," he said in reference to a survey on Friday showing British consumer morale has sunk back to depths hit just after last year's Brexit vote.

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