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FTSE 100 edges higher despite Pearson share dump

Last updated: 17:30 18 Jan 2017 GMT, First published: 07:01 18 Jan 2017 GMT

Female Burberry models

FTSE 100 shares closed higher on Wednesday, in spite of investors dumping shares in educational publisher Pearson (LON:PSON).

The FTSE 100 eked out a 0.38% rise to 7,247. Risers included Burberry (LON:BRBY), up 3.6% to 1650p after a strong trading update.

But Pearson shares led the losers as they sank by 29.1% to 573p after it said trading in the US was bad, and it is selling its stake in Penguin Random House books business.

The blue-chip gains overall came despite the pound falling against the dollar and euro, erasing some of the gains made on Tuesday after Theresa May's Brexit speech.

The prime minister's comments on leaving the EU had bolstered sterling. However, on Wednesday the pound fell 0.78% against the dollar to $1.2318 and slipped 0.46% against the euro at 1.1534 euros.

BT (LON:BT.A) fell 0.74% to 380.55p after communications regulator Ofcom fined its mobile phone arm EE £2.7mln for overcharging 40,000 customers for calling the company's service number while roaming within the EU. EE was also accused of not even offering to refund the cash to customers.

The mid-cap FTSE 250 index closed up 0.4% at 18,312 and led by Ferrexpo plc (LON:FXPO), up 6% to 132.5p. But Mitie (LON:MTO) was down 4.7% to 195.8p, having been 13% lower at one point after the outsourcing firm issued its third profit warning.

The FTSE AIM 100 Index ended flat at 4170 and the FTSE AIM All-Share Index up 0.1% to 873.

A total of 30% of the London bourse saw share prices gain and 34% saw falls.


Late session trading

1530 GMT - FTSE 100 nudges higher as investors check out revitalised Burberry

It's not been particularly groundbreaking, but the FTSE 100 was in the black on Wednesday following Tuesday's sell off.

The blue chip index was up 9 points to 7,229 in late trading.

Jimmy Choo PLC (LON:CHOO) seemed to be piggy-backing on Burberry's gains earlier on and was up almost 5% shortly before market close.

The luxury goods sector has been in fettle of late, with foreign tourists taking advantage of the fall in sterling to splash their cash on the UK high street.

Electrical retailer AO World PLC (LON:AO) isn't having such a good time of it. The group's recent decline continued today following on from last week's disappointing trading update.

 

11.30am...FTSE 100 nudges higher as investors check out revitalised Burberry

The FTSE 100 was up 11 points at 7,230.99 mid-morning, led by a revitalised Burberry (LON:BRBY).

Stock in the fashion chain rose 2% after a solid rather than spectacular update on trading, which revealed underlying retail revenues had advanced 4% in the third-quarter.

Growth initiatives, meanwhile, are starting to make an early impact, although not in the US, which remains in reverse gear.

“After giving its website something of a refresh, digital sales are growing impressively,” said George Salmon, analyst at the investment firm Hargreaves Lansdown.

“All in all, there are plenty of encouraging signs for the group just now.”

Of course the big story of the morning came from Pearson (LON:PSON), which saw almost £1.9bn (28%) wiped from its value after its woes in the US higher education market continued to bite hard.

Earlier it outlined plans to cut the dividend and potentially sell its stake in Penguin Random House.

How Mitie has fallen

Among the mid-caps, a third profit warning from the oursourcing specialist Mitie (LON:MTO) sent the stock spiralling a further 7%.  

11.30am...Footsie on the up 

The FTSE 100 got off to a positive start early on as it rose 15 points to 7,235.72, although City traders spent most of the first hour rubber-necking at the car crash that was the latest update from Pearson (LON:PSON).

Shares in the publisher tanked 25% in early deals after it revealed the extent of its woes in the US, where the higher education market continues to inflict massive financial wounds.

The medicine appears to be a cut to the dividend and employee bonuses as well as the potential sale of Pearson’s stake in Penguin Random House.

“The US market has been tough for Pearson for some time now, and while the news that conditions across the pond are likely to remain difficult may not be surprising, the group admitting that things now look so bad its dividend will need a trim is more startling for investors,” said George Salmon, equities analyst at the investment group Hargreaves Lansdown.  

Burberry (LON:BRBY), which also updated Wednesday, was flat after its trading statement, while Ladbrokes Coral (LON:LCL) rose 3% after it too re-assured on its financial performance.

Delving into the small-caps, Fitbug Holdings (LON:FITB) was the star with its shares rocketing 136% after it announced it had landed a significant, new Asian customer.   

6.45am...Footsie set for bounceback 

The FTSE 100 is set to recover some ground after heavy profit taking following Theresa May’s Brexit plans.

Financial spread bet firms see Footsie adding 25 points after shipping more than hundred yesterday to close at 7,220.

It was a rally by the pound that did the damage as it has been the overseas earners that benefit from a lower sterling that has driven the index upwards.

The PM confirmed the UK would not remain in the single market and it was unlikely it will stay a part of the free trade European customs union.

This ‘hard’ stance meant the pound had its best day against the dollar since 2008.

Elsewhere, Wall Street was subdued with the Dow Jones Industrial Average 59 points lower, though Asian markets did better.

There were strong gains in Hong Kong and Tokyo, while Shanghai was flat.  

Headlines

Brexit

  • May to EU: give us a fair deal or you’ll be crushed – The Times

  • Confidence grows as Britons shrug off worries over Brexit – The Times

  • Apple prices rocket because of post-Brexit pound slump – The Independent

The Rest

  • Rolls-Royce's former senior management implicated in bribes and corruption, High Court finds – Daily Telegraph

  • Working households are gloomier about the future than pensioners – Daily Telegraph

  • Russian sex workers are world’s best, boasts Putin – The Times

  • William Hague is joining one of Wall Street’s biggest banks – The Independent

  • Hartlepool shipyard to decommission North Sea oil topsides – Financial Times

  • Xi Jinping signals China will champion free trade if Trump builds barriers – The Guardian

  • Top Trump adviser says post-Brexit trade deal feasible within a year – The Guardian

  • Standard Chartered shares jump on news it has completed three shipping deals worth £1.3 billion: - Daily Mail

  • Deutsche Bank agrees US$7.2 billion settlement with US Department of Justice over mortgage-backed securities – City AM

Commodiities: 

$/£ - 1.2344 as dollar falls sharply

Oil  - US$52.63 up US$0.15

Gold - US$ 1,212 down US$0.7

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