The FTSE 100 confounded expectations by opening lower this morning, despite the US and China signing off on the first phase of their trade deal.

US stocks rallied last night following the signing with the S&P 500 and Dow Jones hitting all-time highs, but UK stocks evidently haven’t followed suit.

Perhaps the market is more concerned about what’s not in the trade deal rather than what is, with agreements over thorny issues regarding Huawei, further tariff reductions and China’s industrial subsidies all absent from the deal.

But by 9 a.m. the UK’s benchmark index had recovered to trade effectively flat at 7,639.50.

PEARSON PLUNGES 

In company news, struggling educational publisher Pearson (PSON) plunged 11% to 549p after it said in a trading statement it expects adjusted earnings per share to be around 57.5-59p, the bottom end of its 57.5-63p guidance range, while full year operating profit is forecast to be around £590m, in line with downgraded guidance.

It also announced its chief financial officer (CFO) Coram Williams was leaving to take on a ‘comparable role’ at another company in Continental Europe. Williams will be replaced by deputy CFO Sally Johnson.

WHITBREAD DOWN AFTER REVPAR HIT

Premier Inn owner Whitbread (WTB) fell 4.2% to £46.32 despite a 1% increase in total sales growth in the third quarter of its financial year.

In a trading update, the firm said it expects full year results to be in-line with expectations thanks to its efficiency programme helping to partially offset high industry cost inflation.

However, what has concerned the market is the firm’s revenue per available room (RevPAR), with UK like-for-like RevPAR falling 4.5% year-to-date and 3.6% in the three months to the end of November.

The firm blamed the fall in room sales on continued economic and political uncertainty in the UK.

ABF HIGHER ON PRIMARK SALES GROWTH

Foods-t0-fashion conglomerate Associated British Foods (ABF) moved 2.2% higher to £26.12 following a first quarter trading update in which guidance was unchanged, with management again reiterating its expectation for ‘progress’ for full year earnings per share.

What may have encouraged the market was its Primark division, which had a strong showing with sales up 4.5% compared to the same period last year and improved like-for-like performance, driven by a marked upturn in the Eurozone.

ABF’s sugar, grocery, agriculture and ingredients businesses also displayed improved revenues and/or margins.

HALFORDS JUMPS ON RECONFIRMED PROFIT GUIDANCE

Specialist retailer Halfords (HFD) jumped 5.5% to 153p after it reaffirmed its expectations for full year underlying pre-tax profit of £50-55m, following a period of ‘solid sales performance’ in which it had delivered ‘continued gross margin growth’.

In the 14-week period to 3 January, group revenue was up +4.6% and +1.3% like-for-like on the back of a strong performance in its cycling division and continued growth in Autocentres and B2B.

WOOD GROUP SOARS ON HIGHER EARNINGS

Energy services company Wood Group (WG.) soared 8.7% to 402p after a full year trading update in which it said it expects higher adjusted earnings of $850-860m for the year, compared with $693.8m a year earlier.

Operating profit before exceptions is expected to be around $410-420m, while revenue is expected to be around the $10bn mark.

Better than anticipated cash generation in the second half of its financial year means the firm will also be able to trim its debt, with net debt set to be reduced below $1.5bn, compared to $1.51bn the previous year.

HAYS DROPS ON PROFIT WARNING

Recruitment company Hays (HAS) fell 2.8% to 167p after it warned on profit as a stronger pound and economic uncertainty kept a lid on growth across several of its key markets in the second quarter.

The company said reported profit for 2019 would be about £245m, about £3m lower than its position at its first quarter trading update in October and represented a £9m reduction versus the number stated at its preliminary results in August.

In the second quarter, ended 31 December 2019, net fees decreased by 7% on a headline basis and by 4% on a like-for-like basis against the prior year.

Fresh prepared food group Bakkavor (BAKK) dipped 1.2% to 135p after it reported a 1.5% rise in revenue in a pre-close trading statement as weaker UK consumer confidence continued to keep a lid on growth.

Marketing company 4imprint (FOUR) moved 1.1% higher to £33.90 after it said in an update that it expects annual profit to be at the 'upper end' of market forecasts following 'encouraging' growth in the second half of the year.

The company said it expected revenue for the year ended 28 December 2019 to be approximately $860.8m, an increase of 17% over 2018. Underlying pre-tax profit for the full year 2019 was expected to be at the upper end of the current market forecast range, it added.

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Issue Date: 16 Jan 2020