London close: Stocks slip on trade concerns
London stocks finished lower on Monday, as miners slipped on China's withdrawal from trade talks, but oil prices hit a four-year high and Sky surged after Comcast outbid Fox for the broadcaster.
The FTSE 100 fell 0.42% or 31.82 points to trade at 7,458,41, while the pound was up 0.36% versus the dollar at 1.31227 and up 0.13% against the euro to 1.1148.
Traders were looking east after China cancelled the latest round of US trade talks, bolstering trade war concerns, just as new US tariffs were due to begin. Beijing declined an invitation to explore further trade talks at the weekend, summoning Washington's ambassador to Beijing to protest over Russia-related sanctions imposed on a Chinese general.
Market analyst Rebecca O'Keeffe at Interactive Investor said: "During the first stages of the US-China trade war, markets concluded that the US President clearly held the upper hand and US markets reached new highs.
"However, as a new round of tariffs are imposed, the market is far less sure that this is a smart thing for the President to be doing. Not only has China retaliated immediately, but many of the new US tariffs are likely to have a direct negative impact on US companies and consumers."
To back-up her case, O'Keefe pointed to recent warnings from various US outfits, including chip-maker Micron Technologies and retailers Walmart and Target, over the negative impact that new trade tariffs might have.
On the UK data front, a monthly survey from the CBI showed manufacturing orders have fallen to a four-month low amid a decline in exports.
The industrial trends survey revealed a fall in the manufacturers orders balance to -1 for the three months to September, from +7 a month earlier. Economists had forecast a balance of +4.
Export orders weakened to a level not seen since last October, down to +5 from +9 in the past three reports. This was backed up by a parallel report released by BDO revealing UK export growth was the worst performing of the largest five EU economies in the last quarter.
Economist Sam Tombs at Pantheon Macroeconomics said growth in total orders is weakening from a high rate but the official manufacturing data has been much weaker than independent surveys this year, with output falling by 0.1% quarter-on-quarter in the first quarter and by a further 0.9% in the second.
"In addition, growth in export orders usually lags movements in sterling by about one year; the exchange rate’s relative stability over the last year, therefore, has started to take the edge off growth in exports."
Based on past form, Tombs said the export orders balance will fall to around -5 by the end of this year. "Meanwhile, the chance that overseas customers re-jig their supply chains increases with every day that passes without a Brexit deal. As a result, we doubt that the manufacturing sector’s recovery is about to get back on track."
Looking at individual stocks, meanwhile, the oil sector was boosted as crude oil prices rallied to highs last seen in late 2014, with a barrel of front-month Brent up by 2.836% to as high as $81.09 at one point. Shell and BP were both on the Footsie leaderboard, while crude's rise lifted Tullow despite the company having plugged and abandoned its Cormorant-1 exploration well offshore Namibia after finding "non-commercial hydrocarbons".
Elsewhere, travel stocks were hit as Thomas Cook warned over its full-year profits as it said unseasonably hot weather hit bookings. This sent larger rival TUI sinking lower too, while On The Beach, IAG, Ryanair, easyJet and Carnival were also sent into the red.
Drax slipped after confirming that it is in talks with Spain’s Iberdrola about the potential acquisition of a UK portfolio of pumped storage, renewable hydro and gas-fired generation assets.
AstraZeneca ticked a little lower even as it said that its diabetes drug Farxiga met a key goal in a major clinical study to show the medicine’s heart-protecting benefits.
Tech stocks such as Micro Focus, Just Eat and Sage were lower, in sync with the falls seen at the end of last week for Wall Street's tech-heavy Nasdaq.
On the upside, Sky surged nearly 9% as it urged its shareholders to accept a takeover offer from US-based Comcast after it outbid Rupert Murdoch’s 21st Century Fox for the London-listed broadcaster. Sky said the Comcast offer of £17.28 represents an "excellent outcome" for its shareholders, at a premium of 125% to the closing price 6 December 2016, which was the last business day before Fox’s initial approach.
O’Keeffe said the premium offered for Sky by Comcast was indicative of how much pressure is on traditional media platforms from the likes of Netflix. "Their newer tech savvy rivals have revolutionised the way people engage with TV and internet content and these technology giants are investing huge amounts of money into both popular shows and new content to keep customers coming back for more."
Randgold Resources rallied as it agreed to a merger with larger Canadian rival Barrick Gold to create the largest gold miner in the world. London-listed Acacia Mining, which is 64%-owned by Barrick, was up on the news as well.
South West Water owner Pennon gave up early gains to finish lower even after it maintained its full-year expectations. Its Viridor waste business reported some improvement in recyclate pricing since the end of last financial year, in particular for paper.
SSE was lifted as a major gas discovery was announced at the Glendronach site among the West Shetland islands, where the energy company owns a 20% stake.
In broker note action, Smiths was downgraded to ‘neutral’ at Bank of America Merrill Lynch, while SSP was a new ‘hold’ for Jefferies. Spire Healthcare was resumed at ‘hold’ by Peel Hunt and Johnson Matthey was started at ‘outperform’ by Bernstein.
Capital & Counties was lifted to ‘outperform’ from ‘neutral’ by Credit Suisse.
Market Movers
FTSE 100 (UKX) 7,458.41 -0.42%
FTSE 250 (MCX) 20,488.07 -0.50%
techMARK (TASX) 3,489.56 -0.60%
FTSE 100 - Risers
Sky (SKY) 1,721.50p 8.61%
Randgold Resources Ltd. (RRS) 5,220.00p 6.03%
NMC Health (NMC) 3,362.00p 1.57%
Informa (INF) 746.80p 1.55%
Royal Mail (RMG) 482.50p 1.30%
Royal Dutch Shell 'A' (RDSA) 2,598.50p 1.17%
Tesco (TSCO) 239.40p 1.10%
Relx plc (REL) 1,567.00p 0.93%
GVC Holdings (GVC) 975.00p 0.78%
Ocado Group (OCDO) 911.00p 0.77%
FTSE 100 - Fallers
Intertek Group (ITRK) 4,796.00p -3.13%
TUI AG Reg Shs (DI) (TUI) 1,382.00p -2.95%
Antofagasta (ANTO) 872.00p -2.66%
Severn Trent (SVT) 1,831.00p -2.53%
Just Eat (JE.) 657.00p -2.52%
Standard Life Aberdeen (SLA) 315.80p -2.35%
London Stock Exchange Group (LSE) 4,663.00p -2.24%
Glencore (GLEN) 330.00p -2.02%
British American Tobacco (BATS) 3,544.00p -2.02%
United Utilities Group (UU.) 688.60p -1.91%
FTSE 250 - Risers
Hochschild Mining (HOC) 171.15p 5.16%
NewRiver REIT (NRR) 259.00p 4.02%
Premier Oil (PMO) 129.30p 3.69%
Games Workshop Group (GAW) 4,015.00p 3.35%
Tullow Oil (TLW) 254.00p 2.92%
FDM Group (Holdings) (FDM) 1,000.00p 2.88%
Cairn Energy (CNE) 227.00p 2.71%
Equiniti Group (EQN) 263.50p 2.53%
Syncona Limited NPV (SYNC) 285.00p 2.52%
Wood Group (John) (WG.) 761.20p 2.39%
FTSE 250 - Fallers
Thomas Cook Group (TCG) 56.00p -28.07%
Bank of Georgia Group (BGEO) 1,751.80p -6.76%
On The Beach Group (OTB) 478.00p -6.09%
Contour Global (GLO) 205.20p -4.82%
Capita (CPI) 140.65p -4.16%
Sequoia Economic Infrastructure Income Fund Limited (SEQI) 109.50p -3.54%
Polypipe Group (PLP) 356.00p -3.52%
Card Factory (CARD) 186.20p -3.47%
Computacenter (CCC) 1,306.00p -3.26%
Euromoney Institutional Investor (ERM) 1,338.00p -2.61%