The FTSE 100 extended this week's decline, dropping 28 points, or 0.4%, to 6,710, with care insurer Admiral Group leading the index lower after a disappointing trading update.
‘Despite [US aluminium producer] Alcoa (AA.N) kicking off earnings season to a good start and the expectations of a dovish Federal Open Market Committee statement this evening, the bulls still seem to be in disarray after the kicking they’ve taken over the last two days,’ said Jonathan Sudaria, dealer at Capital Spreads. ‘In an unusual sign of the way markets interpret news; negative stories are getting all the attention whilst bullish stories are being shrugged off.’
Admiral Group (ADML) shed 95p, or 6%, to £14.79, after revealing a fall in first-half revenues and a squeeze on margins. Turnover for the six months to June slipped to £1 billion from £1.1 billion a year ago, while total premiums fell by 9%.
‘In the UK there are some signs that premiums are no longer falling but we have yet to see firm evidence of an inflection point and a return to premium growth,’ said chief executive Henry Engelhardt.
Berenberg analyst Peter Eliot, who rates Admiral a ‘sell’, said investors would be forced to revise their expectations. ‘Consensus is currently forecasting flat earnings in 2014 and 2015 on 2013. However, with the company forecasting falling margins and showing falling turnover, we believe these earnings forecasts will have to come down top our level.’
Aviva (AV) was another faller, dropping 19.5p, or 3.8%, to 493p after the insurer’s plans to turnaround its performance failed to impress investors.
Aviva announced plans to double annual excess cashflow to £800 million by the end of 2016 and cut operating expenses to less than half operating income over the same period, together with accelerating growth at it fund management arm Aviva Investors. But investors judged the targets did not go far enough. ‘These are good targets but we do not see them as overly challenging, in the sense that Prudential’s have been in the past few years,’ said Eamonn Flanagan, analyst at Shore Capital.
EasyJet (EZJ) and British Airways owner International Consolidated Airlines Group (ICAG) jumped 3.2% and 1.3% to £12.88 and 340.2p respectively, regaining some ground after yesterday's profit warning from Air France KLM (AIRF.PA).
The AIM market saw some spectacular moves this morning, with oil and gas company Roxi Petroleum (RXP) soaring after it announced oil and gas discoveries at its flagship BNG project in west Kazahstan. Shares rose 112.5% to 8.4p on the news.
Stockbroker and corporate adviser Daniel Stewart Securities (DAN) rose 28% to 0.3p after announcing it would narrow losses over the year to the end of March.
The oil price has reached a one-month low below $109 a barrel after Libya restarted production at its El Sharara filed following four months of protests. Violence in the Middle East and Ukraine provided support for the gold price, which has risen to $1,324.30.