LONDON MARKETS: FTSE 100 Pulled Lower By Slump For WPP
April 16 2018 - 12:29PM
Dow Jones News
By Victor Reklaitis and Sara Sjolin, MarketWatch
Whitbread shares leap as expectations build over possible
spinoff
U.K. stocks closed lower on Monday, led lower by a fall in WPP
PLC shares after its longtime chief executive, Martin Sorrell,
resigned in the face of a probe.
A fall in shares in Sage Group PLC was also dragging on the FTSE
100 index, but a surge for Costa Coffee parent Whitbread PLC on
news of an activist investor stake helped limit the drop.
Traders also were assessing the fallout from the airstrikes on
Syria that the U.S., U.K. and France conducted late Friday.
How markets are moving
The FTSE 100 dropped 0.9% to close at 7,198.20, pulling back
after three weekly rises in a row
(http://www.marketwatch.com/story/uk-stocks-fall-as-sage-plunges-16-on-sales-warning-2018-04-13).
The London benchmark remains down for the year, off by 6.4%.
The pound traded at $1.4328, up from $1.4239 late Friday in New
York. A stronger pound tends to weigh on the British blue-chip
index as it can reduce revenue made overseas by multinational
companies when it's converted back into sterling.
What's driving markets
The key geopolitical concern for investors in recent days has
been a conflict between Syria and the U.S. and its allies.
Syrian armed forces on Sunday unleashed airstrikes
(http://www.marketwatch.com/story/syria-brushes-off-us-led-airstrikes-launches-new-attacks-against-rebels-2018-04-15)
against rebels and shelled what rescue workers said were civilian
homes. With the move, President Bashar al-Assad was seeking to
demonstrate his regime's continued strength following the U.S.-led
missile attack
(http://www.marketwatch.com/story/trump-defends-declaring-mission-accomplished-after-syria-airstrikes-2018-04-15)
earlier in the weekend.
See:How the strikes on Syria will impact your stock investments
(http://www.marketwatch.com/story/heres-what-to-do-with-your-stocks-if-the-us-military-strikes-syria-2018-04-13)
Expectations for the West to take military action had been
building since a suspected chemical-weapons attack killed civilians
in Syria more than a week ago. Analysts have worried about the U.S.
ending up in a conflict with Russia, which backs the Syrian
regime.
The Trump administration has said it would slap more sanctions
on Russia, targeting companies tied to the Syrian regime and its
chemical weapons. Companies with heavy exposure to Russia, such as
steelmaker Evraz PLC (EVR.LN) and oil giant BP PLC (BP.LN) (BP.LN),
were among major decliners on Monday, down 7% and 1.6%,
respectively.
Read:Russian stocks slip as traders brace for another round of
U.S. sanctions
(http://www.marketwatch.com/story/russian-stocks-slip-as-traders-brace-for-another-round-of-us-sanctions-2018-04-16)
What strategists are saying
"The U.S.-led strikes against Syria turned out to be a nonevent
as far the markets are concerned and fortunately there were no
reports of casualties. Only 3 targets were hit and the wave of
strike action has already been declared to be over--at least for
the time being, anyway. However, investors still remain wary of the
potential for tensions to escalate between Russia and the West,"
said Fawad Razaqzada, technical analyst at Forex.com, in a
note.
Stock movers
WPP shares (TSCO.LN)fell 6.5% for one of the FTSE 100's biggest
drops after Sorrell resigned from his job as CEO of the advertising
heavyweight.
Sorrell stepped down
(http://www.marketwatch.com/story/wpp-ceo-martin-sorrell-steps-down-2018-04-15)
in the face of a company investigation into an allegation of
personal misconduct. The move ends his more than three decades of
leadership at the world's largest advertising company, which he
founded.
"One of [Sorrell's] strong points is the ability to pull
together all parts of the business to work together, and with that
in mind there is a strong chance we may see the company broken up,"
said Joshua Mahony, market analyst at IG, in a note.
"There is reason to believe that the current share price may not
fully capture all components of the firm, and investors are
certainly interested in the possibility that value could be
captured by splitting the firm into separate pieces," he said.
Read more:Why probe drove WPP CEO Martin Sorrell to resign
(http://www.marketwatch.com/story/why-probe-drove-wpp-ceo-martin-sorrell-to-resign-2018-04-16)
Sage's stock (SGE.LN)slumped 3% for the FTSE's largest decline.
Shares in the provider of accounting software are adding to
Friday's dive of 8.2%, which came after the company cut its
full-year forecast for revenue growth
(http://www.marketwatch.com/story/sage-cuts-revenue-growth-view-on-slow-first-half-2018-04-13).
On the upside, Whitbread PLC shares (WTB.LN)jumped 7.2% after
Elliott Management said in a statement
(http://www.prnewswire.co.uk/news-releases/elliott-statement-on-whitbread-plc-679776143.html)
over the weekend that it has amassed a stake of more than 6% in
Britain's biggest hotel and coffee-shop operator and believes it's
currently the largest investor in the company, whose businesses
include the Premier Inn chain.
The development is viewed as adding to the pressure on Whitbread
to spin off its Costa Coffee business, because the U.S. activist
hedge fund is among the shareholders that has called for that type
of move, according to multiple published reports.
(END) Dow Jones Newswires
April 16, 2018 12:14 ET (16:14 GMT)
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