“The FTSE 100 advances 0.3% to 7,248 thanks to strength in the natural resources sector, backed up by a positive showing from tobacco stocks and insurers. We’re back in corporate earnings season again with a flurry of results and trading updates from big names scheduled for the coming few weeks, which should drive increased trading volumes on the market,” says AJ Bell investment director Russ Mould.
“Shopping centre landlord Hammerson has confirmed widespread speculation by withdrawing backing for a £3.4bn marriage to rival Intu Properties.
“The market has been unconvinced by the deal since the start and subsequent weakness in the Hammerson share price left it open to a bid from French real estate investor Klepierre.
“Klepierre walked away earlier this week as its final 635p bid was rebuffed. While Hammerson shares are higher this morning as investors demonstrate relief at the news, management’s future efforts are likely to be measured against this 635p benchmark.
“Meanwhile Intu, which owns the Trafford Centre in Manchester, is left to cry foul, claiming Hammerson’s explanation of weakening sentiment towards the retail sector is ‘unsatisfactory’.”
“First quarter results from FTSE 100 miner Rio Tinto highlight the scale of problems which can hang over mining companies.
“Rio had to declare force majeure in three commodities – aluminium, titanium and copper – as a result of sanctions on its Russian partner Rusal, issues with the Indonesian government, protests blocking access to a mine in Mongolia and a roaster failure in South Africa.
“Miners from time to time invoke the force majeure clause that lets them walk away from contracted deliveries due to unforeseeable circumstances disrupting operations.
“In Rio’s case, it is quite remarkable that it has largely reiterated its full year guidance despite the aforementioned disruptions, as well as interruption in the first quarter from weather-related issues.”
“You can almost hear the desperation to keep a lid on expectations in the commentary which accompanies today’s first quarter trading update from Dignity.
“Shares in the funeral provider halved in January as it responded to mounting competition by radically altering its pricing structure with significant implications for earnings.
“Its initial assumptions on how many customers would take up its budget option are proving too conservative for now and accordingly it says results for 2018 will be ahead of forecasts while reiterating its belief that trading will be ‘volatile’.
“The Dignity example underlines the old maxim that if shares fall 50% you need a 100% gain just to get back to breakeven.
“Despite a 20% advance in the shares today, building on earlier gains post the full year numbers in March, they still trade more than 40% below the level they traded at before the profit warning earlier this year.”
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