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Britain's FTSE retreats from record, Provident Financial soars
October 13, 2017 / 8:59 AM / 10 days ago

Britain's FTSE retreats from record, Provident Financial soars

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* FTSE 100 down 0.4 pct after record close

* GKN tumbles after profit warning

* Provident Financial jumps 9 pct

* Strong inflows for Ashmore, Man Group drive shares

By Helen Reid

LONDON, Oct 13 (Reuters) - Britain’s major share index retreated on Friday, weighed down by engineering group GKN after a profit warning, while Provident Financial soared after the embattled sub-prime lender gave an encouraging trading update.

The FTSE 100 was down 0.5 percent by 0825 GMT, fresh from the record close it managed in the previous session on the back of a dip in sterling caused by a stalemate in Brexit talks. It was set to inch up 0.09 percent on the week after three weeks of stronger gains.

The pound then jumped higher on a late report Britain might be offered a two-year Brexit transition.

Analysts have been questioning the correlation between the FTSE and the pound, which is the main barometer of EU divorce talks and whose plunge after the Brexit vote helped dollar earners on the index.

“There’s definitely some currency effect but I do think there are other things going on that are harder to get a handle on,” said Laith Khalaf, analyst at Hargreaves Lansdown.

“It wasn’t a huge move in the stock market yesterday. It wasn’t this giant leap that took it over this record, it was a small stumble really,” he added, pointing to a low volatility and low interest rate environment driving equities globally.

Engineering group GKN sank 6.5 percent, leading the FTSE lower after it warned that full-year profit would disappoint expectations due to weaker trading in aerospace.

“As anticipated, aerospace has seen a significant reduction in margin caused by pricing pressures, continuing operational challenges and the impact of programme transitions,” analysts at Panmure Gordon said.

Sub-prime lender Provident Financial shone among mid-caps, soaring 15 percent to a six-week high after it said it had implemented a recovery plan for its troubled home credit business, helping relieve investors in the stock which has plummeted around 70 percent this year.

“What we’re seeing today is really no further deterioration from where we were in August, so the market is reacting positively to that and to the recovery plans that Provident has laid out,” said Khalaf.

Third-quarter results from active fund managers Ashmore and Man Group painted an encouraging picture for the active management industry threatened by the rise of passive investing.

Shares in emerging markets-focused manager Ashmore jumped 8 percent after it reported its highest net inflows of client money for four years, helped by a strong performance in emerging markets driving investors into the asset class.

Shares in hedge fund Man Group also gained 2.8 percent to hit a two-year high after market gains drove inflows into its funds, with assets in the long-only stock-picking unit rising 11 percent while $600 million flowed into emerging market debt strategies.

Reporting by Helen Reid; Editing by Andrew Heavens

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