London close: Stocks slump despite possible 'Brexit' breakthrough
London stocks slumped on Wednesday as the pound shot higher on hopes of a 'breakthrough' in its negotiations on Brexit with Brussels, although strategists were cautious.
The EU's chief Brexit negotiator Michel Barnier was reported to have said that he was prepared to give the UK a deal unlike with any other country.
Barnier was quoted by Reuters as saying: "We are prepared to offer a partnership with Britain such as has never been with any other third country."
The FTSE 100 shed 0.71% or 54.01 points to 7,563.21, while the pound was vaulted 0.98% higher against the dollar to 1.30017 and 0.97% firmer versus the euro at 1.1116.
A stronger pound tends to dent the top-flight index as around 70% of its constituents derive most of their earnings from overseas.
The FTSE 250 was also lower, giving back 0.54% or 112.36 points to 20,736.88, even as the major equity benchmarks in the US and on the Continent (save in Spain) were moving higher on the hope of a ratcheting down in trade tensions, should Ottawa and Washington succeed in reaching a deal on trade.
Nonetheless, Barnier also insisted that the EU would not allow a deal that weakened the body's single market.
Earlier, Britain's lead trade negotiator, Dominic Raab had told members of the House of Lords that his goal remained to reach a deal by the time of the European Union summit in October, although it was not possible to provide an exact timetable.
But he also said the UK could not be cavalier about the risk of a 'no-deal', whether it be due to the intransigence of the negotiators, the EU's member states or its Parliament.
Should no deal finally be agreed, then Westminster might choose to withhold some of the payments already agreed with Brussels.
On that note, Craig Erlam, senior market analyst at Oanda, said: "While this doesn't mean the EU's red lines have changed – in fact he explicitly confirmed that they must be respected, along with the UK's – it does suggest that more constructive conversations can happen to find a workable solution that suits both sides, should one exist.
"That's a big change from the focus on punishing the UK for voting to leave which appears to have been the case for the last two years."
For his part, Chris Beauchamp at IG added: "Unfortunately [...] there is feeling that we have seen this all before.
"Almost all the preceding 'breakthroughs' have been swiftly proven to be a false dawn, and thus while we are seeing the pound spike higher, there is certain to be some hesitancy until we see a more consistently positive tone from the EU."
In corporate news, Bunzl was the biggest riser a day after releasing solid first-half results and announcing its first acquisition in Norway.
Elsewhere, listed infrastructure investment firm HICL Infrastructure slipped as it entered into an agreement to sell its 9.7% interest in the AquaSure Desalination PPP Project.
Diploma gained as it said chief executive Richard Ingram has left the technical equipment supplier after less than four months in the job. The company also said it was trading solidly and on track to meet expectations for annual profit.
GVC Holdings rallied after Morgan Stanley initiated coverage of the stock at 'overweight'. It said cross-selling, mobile catch-up and greater geographic diversification will keep growth above peers.
Micro Focus rose after announcing the start of a share buy-back programme with an initial tranche of up to $200m, while James Fisher advanced after it posted a 20% increase in first-half profit.
Share repurchases were also behind gains in Carnival stock.
Utilities were in focus as Citi said that after several years of exuberant prices, the table has turned in the face of political, regulatory and macro risks, with United Utilities and Centrica both higher as it highlighted them as top picks.
"While we expect a turbulent ride in the months ahead given the uncertainties of Brexit and questions over the stability of the current UK government, we cannot ignore the fact that we are starting to see fundamental value," the bank said.
Oilfield services provider Petrofac finished in the red even after saying it swung to a net loss in the first half and announcing the provisional award of an engineering, procurement and construction contract worth $600m with Algeria’s Sonatrach.
Capital & Regional and Intu were both initiated at 'buy at Berenberg, while Chemring was started at ‘market perform’ by Raymond James.
Standard Life Aberdeen fell as JPMorgan lowered its target on the shares from 500.0p to 425.0p, with Tesco lower on the back of downbeat comments out of analysts at Barclays.
Market Movers
FTSE 100 (UKX) 7,563.21 -0.71%
FTSE 250 (MCX) 20,736.88 -0.54%
techMARK (TASX) 3,560.77 -0.48%
FTSE 100 - Risers
Micro Focus International (MCRO) 1,319.50p 2.93%
Bunzl (BNZL) 2,392.00p 2.88%
United Utilities Group (UU.) 729.40p 1.53%
Associated British Foods (ABF) 2,320.00p 1.49%
Land Securities Group (LAND) 939.50p 1.40%
Carnival (CCL) 4,693.00p 1.10%
Experian (EXPN) 1,942.50p 0.91%
London Stock Exchange Group (LSE) 4,634.00p 0.80%
CRH (CRH) 2,627.00p 0.77%
SEGRO (SGRO) 663.20p 0.76%
FTSE 100 - Fallers
Tesco (TSCO) 249.90p -3.21%
Royal Mail (RMG) 464.30p -3.19%
Standard Life Aberdeen (SLA) 319.30p -3.13%
Fresnillo (FRES) 934.60p -2.42%
Anglo American (AAL) 1,596.60p -1.83%
Antofagasta (ANTO) 832.40p -1.77%
Rentokil Initial (RTO) 336.00p -1.73%
Johnson Matthey (JMAT) 3,568.00p -1.68%
Standard Chartered (STAN) 642.40p -1.55%
Smurfit Kappa Group (SKG) 3,242.00p -1.52%
FTSE 250 - Risers
Syncona Limited NPV (SYNC) 276.00p 3.95%
Thomas Cook Group (TCG) 84.05p 2.88%
Diploma (DPLM) 1,395.00p 2.20%
Millennium & Copthorne Hotels (MLC) 523.00p 1.95%
Barr (A.G.) (BAG) 702.00p 1.89%
Intermediate Capital Group (ICP) 1,043.00p 1.66%
Victrex plc (VCT) 3,220.00p 1.64%
Aveva Group (AVV) 2,824.00p 1.44%
SIG (SHI) 131.50p 1.31%
Spire Healthcare Group (SPI) 176.20p 1.26%
FTSE 250 - Fallers
Metro Bank (MTRO) 2,790.00p -4.58%
Stobart Group Ltd. (STOB) 239.50p -3.82%
Kier Group (KIE) 934.50p -3.81%
Wood Group (John) (WG.) 755.60p -3.35%
Premier Oil (PMO) 116.80p -3.15%
Euromoney Institutional Investor (ERM) 1,292.00p -3.00%
McCarthy & Stone (MCS) 110.00p -3.00%
Rank Group (RNK) 170.00p -2.86%
Rathbone Brothers (RAT) 2,506.00p -2.79%
Moneysupermarket.com Group (MONY) 282.90p -2.75%