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FTSE 100 falls as Pearson shares dive FTSE 100 closes 1% lower as Pearson shares sink
(about 4 hours later)
Shares in education publisher Pearson plunged 11% after it reported falling sales amid "challenging" trading. London: The FTSE 100 index fell almost 1%, dragged lower by Pearson, to close 66 points lower at 6,947.5.
Underlying sales fell 7% in the first nine months of the year, with sales in North America - its largest market - down 9%. After warned of falling sales and "challenging" trading in a gloomy trading update, the world's largest educational publisher ended down 8.4% at 762.5p.
The company said underlying sales had fallen by 7% in the first nine months of the year.
Sales in North America - Pearson's largest market - have fallen by 9%.
Despite the decline, Pearson said cost cutting meant it was still on track to meet its profit targets for 2016.Despite the decline, Pearson said cost cutting meant it was still on track to meet its profit targets for 2016.
But one analyst said the company faced challenges from the changing nature of of the education business. Gary Paulin, head of global equities at Northern Trust Capital Markets, said: "We see that there is a risk that the tight cost controls could end up exacerbating the lack of growth risk. We remain sellers of Pearson."
"Having sold off The Economist and The Financial Times, Pearson is now relying on its core educational businesses for forward momentum, but convincing customers to continue paying for its content represents a huge challenge to the group against a backdrop of free educational resources popping up online," said Hargreaves Lansdown equity analyst George Salmon. Shares in two insurers, Admiral and Standard Life, both fell nearly 4%, with Standard Life admitting it would have to compensate some customers who had been mis-sold annuities in the past.
Shares in Pearson fell 93.50p, or 11.2%, to 739p. That made it the biggest faller on the FTSE 100, with the UK's benchmark share index down 59.54 points, to 0.9%, at 6,954.01 shortly before midday. On the currency markets, sterling ended unchanged against the dollar at $1.219, but was down very slightly against the euro at €1.109.
Ladbrokes shares fell 1.9%. The bookmaker, which is planning to merge with Coral, announced the two had sold 359 shops to Betfred and Stan James as part of the conditions they must meet in order for their tie-up to be approved by competition authorities.
On the currency markets, uncertainty over the terms of the UK's exit from the EU continued to weigh on the pound. Sterling dipped 0.2% against the dollar to $1.2162, and was 0.3% lower against the euro at €1.1071.
The yield on UK government bonds, or gilts, rose with the yield on benchmark 10-year gilts hitting 1.21% at one point on Monday morning - the highest rate since 24 June, the day after the EU referendum.The yield on UK government bonds, or gilts, rose with the yield on benchmark 10-year gilts hitting 1.21% at one point on Monday morning - the highest rate since 24 June, the day after the EU referendum.
Gilt yields - which move inversely to the price of bonds - have been rising over the past few days. Analysts have said the increase is due to the uncertainty over the impact of Brexit and expectations of accelerating inflation as the pound weakens. Gilt yields - which move inversely to the price of bonds - have been rising over the past few days.
Analysts have said the increase is due to the uncertainty over the impact of Brexit and expectations of accelerating inflation as the pound weakens.