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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.

 
FTSE falls as Next warns of toughest year since crisis

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.

Lakehouse (LAKE) fell 10.3% to 43.9p as the social housing contractor fought back against a shareholder revolt led by star fund manager Mark Slater.

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.

2 comments so far. Why not have your say?

Hotrod

Mar 24, 2016 at 12:44

"there maybe a cyclical move away from clothing"

Nearly every week I get a plastic bag shoved through my letterbox with a request to donate clothing to a charity.

I hardly ever do. Why? for one thing, I don't have any spare clothes to donate. I have always bought practical hard wearing clothes which don't go out of fashion. By the time I've finished with them there no longer wearable.

Judging by the number of bags that do get filled and put on the street not everybody thinks like me.

I find it incredible that so many people discard their clothing at such a rapid rate.

I grew up during the period of austerity after WW II "Make do and mend" was the slogan. How things have changed. Recycling clothing is a huge multi-national business handling many thousands on tons annually.

"Ah yes but we do it to help good causes" is often touted as a justification.

Only the nieve would believe that the charities who's name is on the bags, actually organise collection, sorting, and resale. Very few do. In many cases foreign well organised traders are simply scooping up this very valuable raw material and passing on just a fraction of the derived profit.

Maybe more people are saying to themselves. "Hey, wait a minute, we don't have to this" "We could spend just a little more on the initial outlay and make our clothes last twice as long".

report this

chris johnson

Mar 24, 2016 at 15:34

I wholeheartedly agree with Hotrod, I spend £100-150/year on clothes including shoes - no one wlould want my cast-offs. However I do look smart when I go out.

Time to save the world's resources and wear clothes out?

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