London close: Footsie in full retreat

10th Mar 2011 16:57

Blue chips took a beating as investors focused on weak economic data from China and a downgrade for Spanish debt, rather than the Bank of England decision to keep its key lending rate at 0.5%.China posted a trade deficit of $7.3bn in February compared with the usual surplus, due mainly to the shutdown of factories during the Chinese New Year holiday and higher commodity prices. The unexpected deficit has prompted selling of mining stocks such as Fresnillo, ENRC, Rio Tinto and Anglo-American.Credit ratings agency Moody's cut its stance on Spain as it believes the cost of restructuring the country's banking sector will be much higher than the government expects. The rating drops one grade to Aa2 with a negative outlook as Moody's predicts the Spanish administration, which currently prices a bank bail-out at €20bn, could be as much as €30bn short.As for company results, it has been a tale of two retailers with hard times at Argos and Homebase owner Home Retail Group and a set of forecast-beating figures from supermarket chain Morrisons.Home Retail lowered full year profit guidance as trading remains tough, especially at Argos. The guidance range for the year just finished has been lowered to between £250m and £255m, versus market consensus of £260.9m. "There are clear signs of further pressures on consumer spending, with recent trading conditions, particularly at Argos, proving to be more difficult and volatile than we anticipated," said boss Terry Duddy.Morrisons is also predicting tough times but it bucked the downward trend after it beat expectations in 2010 as its reputation for value had hard-pressed shoppers flocking to its stores. Underlying pre-tax profits totalled £874m for the year, ahead of estimates and up from £767m the previous year. Turnover climbed by 7% to £16.5bn.It also stirred up excitement with its plans to move into the online arena. The Yorkshire-based firm is moving to New York having invested £32m on a stake in FreshDirect, an online grocer operating in the US city. GlaxoSmithKline rose after the US Food and Drug Administration (FDA) gave the green light to Benlysta, a treatment for an inflammatory condition called Lupus. Glaxo developed the drug in conjunction with the drug's discoverer, Human Genome Services.Matrix Group described the FDA approval as "a significant milestone" for Glaxo. "This is significant, because it is the first lupus-drug approval the FDA has granted in 56 years, since steroids (ineffective) were approved for use," the broker said. Matrix has forecast peak sales for Benlysta of £1bn, though the broker thinks this figure may be conservative, given the likely demand for the product. "Some analysts have forecast peak sales of £2.2bn," the broker notes. Elsewhere in the pharmaceuticals sector Shire got a lift from Morgan Stanley, which has raised its rating on the shares to "overweight" and ratcheted up its price target to 2210p. Chip designer ARM slumped as JPMorgan Chase reminded everyone that the firm is heavily exposed if demand for tablet computers ever wanes. Meanwhile, struggling pubs group Punch Taverns posted good gains after it claimed its turnaround campaign remains on track, with strong sales growth in its managed estate in the second quarter while trends in the leased estate improved in the second quarter. Sector peer Enterprise Inns rising in sympathy with Punch.Funeral parlour group Dignity was in demand after it revealed an 8% rise in annual pre-tax profit after a strong performance across all areas of the business. The Midlands-based group said 2011 has started well and it remains confident in its future prospects.Aggreko, the temporary electricity supplier that will power next year's London Olympics, laboured after saying it enjoyed a strong year in 2010, but warning that the current turmoil in the Arab world makes predicting this year's outcome difficult. Pre-tax profits were up by nearly a quarter from 2009 at £307.1m. Revenues were up by 20% to £1.23bn. The company was helped by its participation in some big events, including the football World Cup in South Africa and the Vancouver Winter Olympics. Standard Life also fell, even after it reported a "good" 2010, with net adjusted inflows up 46%. The insurer says it's made a strong start to 2011. TalkTalk Telecom perked up as tracker funds scrambled to increase their holdings following last night's FTSE indices components reshuffle. The sale of a chunk of shares last month by the firm's co-founder David Ross has increased the size of the "free float" - the proportion of shares that are not held by large owners - and this resulted in TalkTalk's weighting in the index calculation being increased. Cineworld says it is now Britain's biggest cinema operator after seeing strong revenues in 2010. Sales climbed by 4.8% to £342.8m, though pre-tax profits were more or less flat at £30.4m.Stellar Diamonds is sitting on a cool £6m after the West Africa-focused explorer's latest fundraising attracted a lot of attention from the City. A placing of 77.5m shares at 8p each means it can now fast track its highly promising kimberlite assets - Tongo in Sierra Leone and Droubja in Guinea. The money should last a year.FTSE 100 - RisersShire Plc (SHP) 1,796.00p +1.64%Morrison (Wm) Supermarkets (MRW) 285.00p +1.60%Sage Group (SGE) 272.10p +0.63%Unilever (ULVR) 1,848.00p +0.49%FTSE 100 - FallersARM Holdings (ARM) 522.50p -8.97%Standard Life (SL.) 226.90p -7.27%Aggreko (AGK) 1,390.00p -6.65%Fresnillo (FRES) 1,513.00p -4.78%FTSE 250 - RisersPunch Taverns (PUB) 75.50p +6.34%TalkTalk Telecom Group (TALK) 141.00p +4.83%Dignity (DTY) 737.50p +2.86%JD Wetherspoon (JDW) 430.90p +2.16%FTSE 250 - FallersAquarius Platinum Ltd. (AQP) 349.50p -6.80%Laird (LRD) 146.20p -6.40%Ashtead Group (AHT) 194.00p -6.05%Yule Catto & Co (YULC) 196.50p -5.98%