October 17, 2018 / 9:26 AM / in a month

FTSE 100 rises, led by Pearson; Mediclinic sinks as earnings sag

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* FTSE 100 up 0.3 pct

* Lower-than-expected inflation hurts pound, helps FTSE

* Pearson gains 4 pct after sticking to guidance

* Mediclinic sinks 20 pct on weaker margins

By Helen Reid

LONDON, Oct 17 (Reuters) - Britain’s top stock index climbed on Wednesday, with Pearson’s outlook impressing the market, while mid-cap Mediclinic sank by a fifth after its results missed estimates.

The FTSE 100 was up 0.3 percent by 0835 GMT after weaker-than-expected inflation data took the pound down a notch. The index is dominated by international exporters, who benefit from a weaker currency.

Shares in education publisher Pearson topped the FTSE with a 3.9 percent rise after it stuck to its target of returning to profit this year.

“The education giant has been shifting away from more traditional classroom materials in favour of digital, and progress there looks more positive,” said Nicholas Hyett, equity analyst at Hargreaves Lansdown.

Pearson is a widely shorted stock, and the amount of shares out on loan has risen this year, data from FIS Astec Analytics showed.

A weak update from mid-cap housebuilder Crest Nicholson sent the shares down 6.2 percent. That weighed on FTSE 100 housebuilders Persimmon, Taylor Wimpey, and Berkeley Group which lost 1.6 to 3.2 percent.

Crest Nicholson warned its full-year profit would be lower than expected, citing a challenging real estate market, and said its chief financial officer had stepped down.

Hargreaves Lansdown shares gained 3.3 percent after Bernstein analysts upgraded it to “market-perform” from “underperform”, saying they were now more convinced its valuation is justified.

Shares in software company Micro Focus were also among top gainers, up 3.1 percent as tech shares across Europe climbed.

Overall, analysts are downgrading their earnings estimates for the FTSE 100 as well as the mid-cap FTSE 250 index, which was down 0.1 percent on Wednesday.

“Valuations don’t look particularly stretched in absolute terms, but the earnings newsflow is still mixed at best,” said Ian Williams, strategist at Peel Hunt.

The mid-cap segment, home to more growth stocks, fell in last week’s selloff as investors seemed to turn back to value plays. Growth still had its attractions, though.

“You can be too gung ho about saying I’m rotating into value, if the earnings are still quite disappointing,” said Williams.

Mid-caps saw big moves after results and broker notes. Mediclinic shares sank 20 percent to the bottom of the FTSE 250 after its earnings and margins missed estimates, hit by weaker performance in its Swiss segment.

“Investors will likely be disappointed by Swiss performance while revised margin guidance may imply another leg down in the Swiss story, introducing further uncertainty,” wrote UBS analysts.

Inchcape shares tumbled 10 percent after HSBC slashed its target price on the stock to 650p from 840p.

Dealmaking was also a mover. Shares in ContourGlobal climbed 3 percent after the power firm said it was in talks to possibly buy Spanish utility Iberdrola’s 50-megawatt solar power plant in Spain.

Among small-caps, Asos shares jumped 12 percent after the online fashion retailer said its potential was “huge”. It narrowly beat forecasts with a 28 percent jump in 2017-18 profits, maintaining guidance for its new financial year .

“Asos’ positive statement should reassure investors today, concerned by recent disappointments in the retail sector (muted sales growth and various profit warnings),” said Stifel analysts.

Reporting by Helen Reid, editing by Larry King

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