Royal Mail and airlines spoil start of quarter

By City A.M.

THE UK’S top share index lagged other European markets yesterday as investors kept one eye on developments over Brexit from the ruling Conservative party’s annual conference, and another on Ryanair’s 13 per cent dive after a profit warning.

Gains in sterling on finance minister Philip Hammond’s speech and a report of Brexit progress reined the FTSE 100 back.

The FTSE 100, whose companies make 70 per cent of their earnings from abroad, fell 0.2 per cent while the domestically focused mid cap index rose 0.5 per cent.

Politics aside, big weight on the FTSE 100 was Royal Mail. Shares in the postal service operator sank as much as 20 per cent after a trading statement warning full-year performance will be “significantly below target” due to labour market and other cost pressures impacting margins “more than anticipated”.

Oil majors Shell and BP rose 0.6 and one per cent respectively, the biggest supports to the FTSE, as Brent prices climbed to their highest since November 2014 ahead of U.S. sanctions against Iran.

Airlines, which have recently been hit by rising oil prices that could increase their fuel costs, were under further pressure after a profit warning from Ryanair. Europe’s largest low-cost carrier cut its forecast for full-year profit by 12 per cent and said there could be worse to come if recent coordinated strikes across Europe continue to hit traffic and bookings.

Housebuilders were another weak spot.

Berkeley Group, Barratt Developments, and Persimmon were among the top fallers on the FTSE, down one to three per cent after the Conservative Party set out plans to levy an extra fee on foreign buyers of homes in Britain.

United Utilities rose 2.6 per cent after a Deutsche Bank upgrade to buy.

Among the smaller companies, Avocet Mining plummeted 37.9 per cent after warning it could be broken up as the gold miner continues talks with its largest shareholder to restructure its debt.

This article provided by NewsEdge.