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FTSE falls as Next warns of toughest year since crisis
Next highlights bleak plight of retailers, warning year ahead could be 'the toughest we have faced since 2008', weighing on FTSE 100.
The FTSE 100 has fallen into the red, weighed down by a slump in mining stocks and a dive in the shares of Next, which warned it faced the toughest conditions since the financial crisis.
The UK blue-chip index fell 65 points, or 1%, to 6,135, with Next (NXT) the biggest faller, down 8.6% at £60.87, despite posting a 5% rise in annual profit and 5.3% rise in the dividend to 158p.
Investors took fright at the clothing retailer's bleak outlook for 2016, as it claimed that 'the year ahead may well be the toughest we have faced since 2008'.
'Investors will find very few crumbs of comfort in fashion retailer Next's outlook for the coming year,' said Russ Mould, investment director at AJ Bell.
'The group's improved results and increase in its dividend were outweighed by its warning that this year could be the toughest since the financial crisis of 2008. Uncertainty in the global economy is a major factor but there are also concerns that there may be a cyclical move away from spending on clothing.'
Next's warning took its toll on rival retailers. Tesco (TSCO) fell 3.1% to 191.5p, Marks and Spencer (MKS) was down 3% at 400.3p, Sports Direct (SPD) fell 2% to 350.7p and Sainsbury's (SBRY) traded 1.7% lower at 275.9p.
Mining stocks retreated as commodities prices were hit by a rise in the dollar, prompted by hawkish comments from James Bullard, president of the St. Louis Fed.
Bullard highlighted the risk of two rate rises this year, but markets are only pricing in one. The pound fell 0.3% to $1.407 against the rallying dollar.
'A week ago the market was caught by surprise at how dovish the Federal Reserve was with its statement and subsequent press conference from Janet Yellen, which more or less at the time put paid to any thoughts of an April rate rise,' said Michael Hewson, chief market analyst at CMC Markets UK.
'It's taken less than a week for this narrative to reverse, begging the question as to what has changed in such a short space of time to prompt such a change in tone.'
Mining stocks in the red included:
- Anglo American (AAL) -5.6% at 494.4p;
- Glencore (GLEN) -4.5% at 146.5p;
- Antofagasta (ANTO) +3.9% at 463.6p;
- Fresnillo (FRES) -3.8% at 913.5p;
- Rio Tinto (RIO) -3.7% at £18.97;
- BHP Billiton (BLT) -3% at 771.3p.
Emerging market-focused stocks also suffered from the dollar's rally. Standard Chartered (STAN) dropped 450.4p, Prudential (PRU) fell 4.3% to £12.89 and on the FTSE 250, Aberdeen Asset Management (ADN) was down 3% at 262.2p.
Renishaw (RSW) was the biggest 'mid cap' faller, down 9.,5% at £18.54 as the engineering group issued a profit warning, citing a lack of orders from the Far east.
Among 'small cap' stocks, Premier Foods (PFD) gave up some of yesterday's spectacular gains on news of a bid approach from US group McCormick & Co (MKC.N) as Japanese group Nissin Foods (2897.T) snapped up a 17.3% stake.
Shares in BlackRock World Mining (BRWM ) fell 16p, or 6.8%, to 213.4p as the investment trust traded without the attraction of its next 14p dividend.
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- Next PLC (NXT.L)
- Tesco PLC (TSCO.L)
- Marks and Spencer Group PLC (MKS.L)
- Sports Direct International PLC (SPD.L)
- J Sainsbury PLC (SBRY.L)
- Anglo American PLC (AAL.L)
- Glencore PLC (GLEN.L)
- Antofagasta PLC (ANTO.L)
- Fresnillo PLC (FRES.L)
- Rio Tinto PLC (RIO.L)
- BHP Billiton PLC (BLT.L)
- Standard Chartered PLC (STAN.L)
- Prudential PLC (PRU.L)
- Aberdeen Asset Management PLC (ADN.L)
- Renishaw PLC (RSW.L)
- Premier Foods PLC (PFD.L)
- Lakehouse PLC (LAKE.L)
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by Michelle McGagh on Aug 23, 2016 at 16:08