London shares ended lower on Wednesday after insurer Admiral (LON:ADM) felt the negative impact of Brexit vote.
The blue-chip FTSE 100 finished down 0.5% at 6,859 with Admiral leading the way, down 7.9% at 2,075p, after it said falling interest rates since the referendum had affected its solvency ratio, although it stressed the ratio "remains strong".
Admiral also cited other risks to its business following the Brexit vote. These include interest and exchange rate volatility, and the possible withdrawal of passporting rights that allow UK financial services firms to trade in Europe.
Admiral's comments overshadowed the news that its pre-tax profits increased by 4% to £193m for the six months to 30 June.
There was some upbeat UK jobs data early in the session, with the unemployment rate at an 11-year low of 4.9%, while the employment rate at 74.5% was the highest since comparable records show all the way back to 1971.
However, a drop in job vacancies has taken the shine off the numbers.
“Solid job growth in Q2 and the fall in the claimant count in July suggest the recovery continues, but the fall in job vacancies points to a slowdown in GDP growth, and surveys signal worse ahead,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
The FTSE 250 index of midcaps also turned south, ending down 0.3% at 17,758 – although still 400 points clear of its pre-Brexit levels on June 23.
The FTSE AIM 100 Index was down 0.8% at 3,721 while the FTSE AIM All-Share Index ended down 0.4% at 780.
But gainers in London were in the minority overall. Only 27% of stocks gained this session, while 33% were losers and 40% unchanged.
Nearly doubling its share price, London’s top gainer was Medilink-Global UK (LON:MEDI) which jumped 80% to 1.125p. But that followed a 28.6% drop in the share price on Tuesday when the stock was the top faller in London.
The top loser was Alpha Returns (LON:ARGP), down 37.5% to 0.375p.
Open
Shooting up 15% in early deals FTSE 350 drug firm Indivior was a key feature in the market on Wednesday, whilst insurer Admiral Group Plc (LON:ADM) was the notable faller as it lost 8.5%.
The former, the Reckitt Benkiser spin-out, this morning revealed it had received positive initial results from a phase III study for a treatment for opioid drug addiction.
Having already received fast-track status from the US Food & Drug Administration Indivior hopes to get the new treatment out to market by the end of next year.
Admiral’s seemingly positive performance – including a record for first half turnover – belied the fact that statutory pre-tax profits missed the market’s high expectations (reported at £189.5mln versus analyst consensus forecasts for £191.8mln).
Question marks were also raised over the insurer's capital position and its underwriting.
The insurer nevertheless delivered ‘some of the best operating performances in the sector’ according to Nicholas Hyett, analyst at stockbroker Hargreaves Lansdown.
“However, that history of strong performance means that investor expectations are high, and with shares up 20% in the last three months even today’s results have not been enough to keep them from falling back,” Hyett added.
The FTSE 100 benchmark, meanwhile, edged about 10 points or 0.15% lower to 6,883.
On a macro level at least investors remain cautious ahead of an anticipated statement from the US Federal Reserve’s policy makers, investors remain in cautious mood.
There has been some suggestion that the Fed might hike interest rates in September.
Such a move may well dampen Wall Street’s summertime record breaking streak, potentially leading to lower equity valuations on both sides of the Atlantic.
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FTSE 100 seen slightly lower amid investor caution ahead of Fed - 6:55am
Ahead of tomorrow’s statement from the US Federal Reserve’s policy makers, investors remain in cautious mood.
There has been some suggestion that the Fed might hike interest rates in September.
Spread betting quotes point to the FTSE 100 opening around eight points down from last night’s close of 6,913.
US markets were soft overnight, with the Dow Jones giving up 84 points, or 0.5%, to close at 18,552 while the broader-based S&P 500 relinquished 12 points (0.6%) to finish at 2,178.
In Asia, the Nikkei 225 has bounced back from Monday’s shake-out; the Japanese benchmark was up 141 points, or 0.9%, at 16,737 in the last hour of trading.
In Hong Kong, the Hang Seng index was also on the up, rising 72 points to 22,983.
In the UK, the big corporate announcements are from construction contractor Balfour Beatty PLC (LON:BBY), car insurer Admiral Group PLC (LON:ADM) and car dealer Lookers PLC (LON:LOOK).
Stateside, updates are expected from retailers Target Corp, Staples Inc and Lowe’s Companies Inc, plus networking equipment giant Cisco Systems Inc.
Around the markets
- Oil – Brent crude for October delivery was trading 35 cents lower tis morning at US$48.88 per barrel, as traders await the weekly stockpiles update from the Energy Information Industry.
- Gold – The main futures contract was off 50 cents at US$1,350 an ounce.
- FX – After a good day against the greenback yesterday sterling was a tad less than 0.1% lower this morning at US$1.3037.
Headlines
- Fund managers to ditch UK. holdings over Brexit
- World’s biggest banks already plotting mass exodus from London after Brexit
- Care home rooms now cost more than £30,000 a year