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UPDATE 1-FTSE 100 lags Europe as earnings underwhelm

UPDATE 1-FTSE 100 lags Europe as earnings underwhelm
Representative image Image Credit: Flickr

London's main index was little changed on Thursday, as Pearson and Whitbread weighed after disappointing trading updates, while investors exercised caution after some elements of the U.S.-China trade deal were unclear. The FTSE 100 drifted in and out of the red but settled to trade flat by 0900 GMT, underperforming the STOXX 600 which added 0.3%.

Education company Pearson sank more than 10% to its lowest level since October 2008, while Premier Inn-owner Whitbread slipped 5%, as corporate earnings kicked into high gear. The FTSE 250 gained 0.1%, helped by a 9% surge in Wood Group after the oilfield services provider forecast higher 2019 core earnings.

Markets digested news that China will boost purchases of U.S. goods and services in exchange for the rolling back of some tariffs under a preliminary trade deal, and we're left a bit edgy as the agreement does not fully eliminate the tariffs. "Given that it has taken nearly two years to pick off the low hanging fruit of a phase-one deal, it does stand to reason that phase-two is likely to take much longer," CMC Markets analyst Michael Hewson said.

"In any case, the tail risk for markets in the short term isn't in the form of further de-escalation, but in the form of the deal falling down and tariffs getting increased again." The finer print of the deal states that if the U.S. is prompted to slap new tariffs which are then disputed by China, the only recourse available would be to quit the agreement rather than lodge an appeal or retaliate.

Still, oil majors and miners gained to limit losses on the main UK benchmark. "Doubts about the details of the deal had surfaced in recent days, so the fact it's done is a relief," Markets.com analyst Neil Wilson said.

Associated British Foods outperformed the FTSE 100, rising 3% as solid revenue growth at its Primark fashion chain over Christmas helped it stand by its annual earnings forecast. Small-cap N Brown plunged 21% and was on track for its worst day in nearly 17 years after the plus-sized fashion retailer issued a profit warning, citing aggressive discounting by its rivals.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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