February 2, 2018 / 10:35 AM / 2 years ago

Results, risk aversion drag FTSE 100 to worst week in nine months

LONDON (Reuters) - Britain’s top share index sealed its worst week in nine months on Friday after results from BT were met with disappointment and commodities stocks tumbled amid a global equity market sell-off.

A worker shelters from the rain under a Union Flag umbrella as he passes the London Stock Exchange in London, Britain, October 1, 2008. REUTERS/Toby Melville/File Photo

The blue-chip FTSE 100 .FTSE index closed down 0.6 percent at 7,443.43 points, its fourth day of straight losses, and suffered its worst weekly decline since late April last year. It mirrored a downturn across equities as investors grew doubtful the year-to-date rally could keep up its recent pace.

“There’s a global flight to safety out of risk assets, so it’s not just a UK phenomenon,” Jasper Lawler, head of research at London Capital Group, said.

“We have had some soft earnings with some quite dramatic falls for individual shares (which) have dented a bit of appetite for UK stocks, then we have had the pound which has been generally pretty resilient, pretty strong,” Lawler added.

Disappointing earnings updates were to blame for the bulk of declines on the day.

BT Group (BT.L) shares hit a five-year low before paring losses slightly to close down 2.2 percent, after the telecoms firm reported third quarter earnings.

While BT broadly met expectations, analysts flagged a lack of growth and concerns around its pension scheme.

“The performance in the Wholesale and Global Services divisions remains stagnant, whilst the pension situation is a concern. Key metrics such as revenues and earnings per share remain patchy and slightly light of expectations,” Richard Hunter, head of markets at interactive investor, said.

AstraZeneca (AZN.L) shares bounced back from an initial slide to lead the FTSE, up 3.1 percent at the close, as analysts focused on stronger earnings despite 2018 guidance that came in below estimates.

Vodafone (VOD.L) was a late gainer, ending the session up 2.4 percent after it confirmed talks with Liberty Global (LBTYA.O) about potential asset swaps in Europe.

Commodities stocks, which had supported the index early in the session, were the biggest weight by the close, sent down by falling metals prices after strong jobs data boosted the U.S. dollar. [MET/L]

Shares in miners Glencore (GLEN.L), Evraz (EVRE.L), Antofagasta (ANTO.L) and Anglo American (AAL.L) fell 2.3 to 4.3 percent, taking 15 points off the index.

Oil majors were also a drag.

BP (BP.L) shares fell 2.4 percent after Norway’s Aker BP (AKERBP.OL), in which BP holds a 30 percent stake, reported fourth-quarter earnings missed forecasts.

BP will report results next week.

Among mid-cap stocks, Provident Financial (PFG.L) gained 7 percent after the sub-prime lender appointed its acting chairman as CEO.

Aerospace and defence electronics group Cobham (COB.L) sank 6.4 percent to the bottom of the FTSE 250, having started the day with a 3 percent gain after it sold its communications unit to Viavi Solutions (VIAV.O) for $455 million.

Analysts said the sale could hurt Cobham’s margins.

Troubled outsourcer Capita (CPI.L) gained 3.6 percent after Morgan Stanley upgraded it to “equal-weight” from “underweight”.

The London Stock Exchange Group offices are seen in the City of London, Britain, December 29, 2017. REUTERS/Toby Melville

Capita’s shares have tumbled this week following a big profit warning and dividend suspension.

“We continue to view Capita as a traditional BPO provider that is competitively challenged, which justifies a discount to its wider peers,” Morgan Stanley analysts said in a note, referring to business process outsourcing.

“But with the shares now up with events, we move to Equal-weight.”

Reporting by Kit Rees; Editing by Toby Chopra and Mark Potter

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