LONDON MARKETS: BG Group, Scottish & Southern Pace U.K. Deliners
Thursday July 24th, 2008 / 12h47
By Steve Goldstein Updates from Scottish & Southern Electricity and BG Group as well as further economic jitters contributed to a decline in U.K. stocks on Thursday, in line with what's been a week-long retreat in commodities prices. The FTSE 100 index dropped 0.9%, surrendering 50.7 points to 5,399.20, as markets throughout Europe sagged amid worse-than-forecast German and euro-zone economic data. U.S. stock futures tilted lower ahead of the latest housing and weekly jobless-claims data. U.K. retail sales declined a worse-than-forecast 3.9% during June, the worst reading since figures were first measured in 1986, reversing a pick-up reported for May that had confounded economists. "Today's number, and the resulting weaker underlying picture of high street spending, will provide some reassurance to policymakers that the slowdown in consumption ... is under way," said Lehman Brothers economists Peter Newland. Against this backdrop, shares of food-and-clothing retailer Marks & Spencer lost 3.7% and Morrison Supermarkets fell 2.3%. A big loser was Scottish & Southern Electricity , shares of which lost 6.3%. The company said adjusted profit before tax in the six months to Sept. 30 will be substantially lower than last year. And for the year, pretax profit will be modestly above last year's levels. Fraser McLaren, analyst at Merrill Lynch, said he interpreted that comment to mean growth in a range of 1% to 5%, the upper end of which would be consistent with analyst forecasts. "The market could have a cool reaction to the statement, although we continue to believe in the underlying value proposition and ability to sustain real dividend growth for the medium term," he said. Shares of BG Group , the gas-exploration firm that's gained 36% over the last 12 months, dropped 4.7% after reporting a 59% rise in second-quarter net income. Though its 97% rise in adjusted net income beat analyst estimates, BG didn't raise its annual earnings view. And no news came out of Brazil, where hopes are high for discoveries from a project run by Petrobras (PBR). Metals and oil plays also fall Meanwhile, shares Tullow Oil sank 6.1% and Kazakh miner Eurasian Natural Resources lost 5.6%. Also lower, shares of InterContinental Hotels (IHG) fell more than 5% as peer Starwood Hotels (HOT) lowered its 2008 earnings outlook. One big gainer was B&Q home-improvement chain owner Kingfisher , up more than 8%. The company said that U.K. comparable-store sales fell 0.5% and that overall same-store sales slipped 1.5%. "We remain pessimistic on forecast prospects given the dire state of the U.K. housing market and the ongoing threats to U.K. consumer spending from waning consumer confidence, rising unemployment and an inflationary squeeze on real disposable income," said Landsbanki analyst Mark Photiades, who rates the company as a buy. "However, balancing these risks are genuine value attractions." Outside the FTSE 100, investors also looked for beaten-up equities, with builder Taylor Wimpey rallying 9% and peer Barratt Developments rising 5.5%. Other gainers included struggling mortgage lender Bradford & Bingley , shares of which added 10.7%. Shares of easyJet Holdings , parent of the discount airline, lost 8.5% as the group said that margins in the fiscal year to Sept. 30 will be hurt by the recent increase in oil prices. It expects adjusted pretax profit between 110 million and 120 million pounds. Analysts polled by FactSet Research had expected a profit of 131.5 million pounds, on average. EasyJet rivals British Airways and Ryanair Holdings also fell, with shares of the former down 5% and the latter losing 3.5%.
