London close: Risk aversion grips FTSE, stocks lower on Trump and Barcelona attacks
London's FTSE 100 index fell below a key technical level as Friday's session wore on, with travel stocks leading the retreat after the terror attacks in Barcelona and the large cabal of overseas focused companies hit by the dollar's weakness amid renewed concerns about the US Presidency.
By the close on Friday, the blue chip benchmark was down just over 60 points or 0.86% to 7,327.98. Over in Europe, it was pretty much the same picture with the DAX down 0.29% to 12,165.19, the CAC 40 lower 0.64% to 5,114.15 and the IBEX 35 in the red by 0.52% to 10,389.40.
The pound was down 0.05% on the dollar at 1.2836 and traded 0.35% lower against the euro at 1.0938.
Fanning the selling, according to traders, were the increased political uncertainty in the US due to the deterioration of relations between President Donald Trump and the business community as reports emerged that a third White House panel of business leaders was to be scrapped.
Analysts at Accendo Markets noted that the Footsie had fallen below its 200-day moving average but was closing in on a return to four-month support at 7,300.
"European equities are sharply negative as another major risk-off move grips global markets. Concerns that the White House has burnt bridges with the business sector, hurting the US dollar, has adversely affected UK and German stocks, the majority of which are reliant on foreign earnings," said Accendo's Henry Croft.
With only a handful of FTSE 100 stocks higher, the index was being pulled lower by its heavy weighting of risk-orientated sectors including oil companies, miners and banks, plus a mix of heavily-weighted foreign-focused defensives.
Commenting on the increasingly divisive political backdrop on Capitol Hill, Michael Hewson, chief market analyst at CMC Markets, said: "With support peeling away from all sides' investors appear to be coming to the conclusion that the US President is likely to find it even more difficult to achieve anything close to what was expected than was the case at the beginning of this year.
"This of course then begs the question as to whether he'll be able to achieve anything at all, at a time when the political cost of continuing to support him rises with each passing day and each tweet storm."
No significant data releases were published in the UK on Friday.
In the States, the University of Michigan's preliminary reading on consumer confidence for the month of August came in at 97.6, beating analysts' expectations of 94.
Company news was extremely thin on the ground.
Initially leading the fallers were British Airways and Iberia owner IAG and EasyJet as both shed 3% in early trading before paring losses. "As we've seen over the last couple of years in Europe, these kinds of atrocities affect tourism and will hit airline earnings. Investors are concerned that demand will fall over the rest of the year, which was already looking like it would be a tough patch for the industry," said analyst Neil Wilson at ETX Capital.
Tour operators Thomas Cook, Dart Group, and to a lesser extent Thomson Holidays parent TUI, were also hit by the expectations of a dip in demand, as was Merlin Entertainments, owner of Madame Tussauds and various other tourist attractions around Europe.
The stock leaderboard was topped by precious metals miner Randgold Resources. The risk-off trading sentiment and the softening US yield environment is conducive for gold, analysts noted, with the Federal Reserve’s indecision having removed a major barrier to the positive gold trend.
Gold was up 0.19% to trade at $1,290/oz. by the close of London, with analyst Craig Erlam noting there seemed to be a number of factors driving the bullish case for the yellow metal: a weak dollar, US political risk, geopolitical risk. The precious metal was seen earlier in the day a touch over $1,300/Oz, a big resistance area, with the $10 drop being seen as technical orders executing. A further weakening dollar coupled with more geopolitical tension, or even just political dissaray in the US, could see the $1,300 mark break, attracting more bids from investors.
Drugmakers AstraZeneca and Merck have been given approval by the US drug administrator to sell Astra's Lynparza ovarian cancer drug in a new tablet form and to a wider range of cancer sufferers, as the pair begin a new partnership on the front foot. The US Food and Drug Administration granted approval for the drug, which is a PARP inhibitor, meaning it stops the actions of the poly ADP-ribose polymerase protein that helps damaged cells to repair themselves.
Reckitt Benckiser said it had completed the $4.2bn sale of its food business, including the French's, Frank's RedHot and Cattlemen's brands, to McCormick & Company. RB said it would use the net proceeds to cut debt.
Mondi and RSA Insurance were two of the few risers after their shares received broker upgrades. Paper maker Mondi was lifted to 'buy' from 'neutral' at Citi, where analysts hiked their target price to 2,580p from 2,120p. RSA was moved to 'outperform' from 'sector perform' by RBC Capital Markets, which hoisted the target to 750p from 625p.
FTSE 100 - Risers
Randgold Resources Ltd. (RRS) 7,495.00p 1.22%
Rentokil Initial (RTO) 295.50p 1.20%
RSA Insurance Group (RSA) 652.00p 0.38%
Mondi (MNDI) 2,068.00p 0.34%
Worldpay Group (WPG) 423.60p 0.14%
Anglo American (AAL) 1,280.00p 0.08%
SSE (SSE) 1,437.00p 0.07%
Standard Life Aberdeen (SLA) 431.60p 0.05%
Rio Tinto (RIO) 3,429.50p 0.00%
Antofagasta (ANTO) 943.50p -0.11%
FTSE 100 - Fallers
Paddy Power Betfair (PPB) 7,180.00p -3.95%
Babcock International Group (BAB) 815.00p -2.98%
Shire Plc (SHP) 3,764.50p -2.75%
Fresnillo (FRES) 1,533.00p -2.11%
Land Securities Group (LAND) 1,003.00p -2.05%
Informa (INF) 697.00p -2.04%
Royal Mail (RMG) 392.60p -2.02%
DCC (DCC) 6,825.00p -2.01%
WPP (WPP) 1,564.00p -2.01%
British Land Company (BLND) 612.50p -2.00%
FTSE 250 - Risers
Acacia Mining (ACA) 194.30p 6.58%
Rank Group (RNK) 233.40p 3.73%
Clarkson (CKN) 2,784.00p 3.59%
Ferrexpo (FXPO) 274.90p 1.66%
Kaz Minerals (KAZ) 716.00p 1.42%
BGEO Group (BGEO) 3,453.00p 1.32%
Metro Bank (MTRO) 3,476.00p 1.25%
CLS Holdings (CLI) 216.10p 1.08%
Aldermore Group (ALD) 228.20p 1.02%
Ted Baker (TED) 2,466.00p 0.98%
FTSE 250 - Fallers
Nostrum Oil & Gas (NOG) 394.00p -5.97%
Hikma Pharmaceuticals (HIK) 1,119.00p -5.97%
JD Sports Fashion (JD.) 343.10p -5.25%
Millennium & Copthorne Hotels (MLC) 451.00p -3.48%
Sirius Minerals (SXX) 27.70p -3.32%
IP Group (IPO) 134.10p -3.10%
Ocado Group (OCDO) 283.50p -2.94%
FDM Group (Holdings) (FDM) 921.00p -2.59%
QinetiQ Group (QQ.) 234.10p -2.54%
Cineworld Group (CINE) 693.50p -2.53%