London close: Stocks slip as Brexit summit and retail sales disappoint
London stocks limped lower on Thursday as Brexit squabbling hit the pound along with disappointing retail sales data and hawkish minutes from the US Federal Reserve.
The FTSE 100 closed down almost 28 points or 0.4% at 7,026.99, having earlier been up 0.3%. The pound gave up its own mid-session gains against the dollar and the euro, falling 0.4% to 1.3059 versus the greenback and 0.3% on the single currency to 1.1364.
Brexit was the big focus as Theresa May was in Brussels for a summit with EU leaders after saying overnight that she was willing to consider extending the transition period.
On Thursday morning May clarified that this "would only be for a matter of months" and then after the summit she gave a press conference saying an extension was an "option" and "what we are not doing is standing her proposing an extension to the implementation period". An extension would mean keeping the UK tied to the EU until beyond the originally planned 2020 deadline, possibly at the cost of several billion euro.
The pound was coming under pressure on reports that the UK government was concerned that EU leaders were close to pulling the plug on Brexit talks, said Michael Hewson, market analyst at CMC Markets.
"This seems somewhat premature given we are still 5 months away from the final exit date, however it also speaks to the frustration of EU leaders that the Prime Minister seems completely unable to come up with a consistent negotiating position."
Some of sterling's losses were on the back of a stronger US dollar after Federal Reserve minutes came out overnight, showing some members of the rate-setting committee were broadly in agreement about the need to lift borrowing costs. A number of the committee expressed support for raising the base rate above a neutral level to keep inflation in check.
Many investors are worried that US policymakers could "overtighten" and push up rates to the point that rather than being accommodative, due to concerns that inflationary pressures might get a little too hot, said Hewson. "At present there is little sign of inflation pressures racing away, which makes the discussion all the more puzzling, nonetheless US bond yields have moved higher as a result with the two-year yield hitting a new post crisis peak above 2.9%. It has raised concerns that President Trump has a point when he talks of the Fed going too fast, even if his way of expressing that concern is unconventional."
Craig Erlam at Oanda said that the minutes are outdated in many ways, as they don’t take into consideration the current unstable market environment, "which, if it persists, may encourage policy makers to take their foot off the gas a little".
Sterling was given no help by domestic data, with retail sales falling by 0.8% compared to August.
"It’s worth noting that the weaker showing in September is probably more a reflection of the bumper summer the UK has just experienced, with good weather and World Cup fever encouraging the public to loosen the purse strings a little," said Erlam, adding that a slowdown in spending in the run up to what is typically an expensive time of year for the consumer does not come as a big surprise.
On the corporate front, building materials group CRH was the worst performer after German giant HeidelbergCement cut its profit outlook, while equipment rental company Ashtead was down as investors read across to disappointing earnings from US rival United Rentals.
Unilever was in the red even as it reported an acceleration in underlying sales growth for the third quarter that was around what the market was expecting.
Games Workshop slumped as it vaguely warned of "some uncertainties" ahead, while some investors cashed in their chips at casino and bingo hall operator Rank Group after quarterly like-for-like revenue declined by 4.9%.
Intu Properties was a touch weaker after the shopping centre operator's leasing update failed to impress, while engineer Renishaw lost ground as it reported a drop in first-quarter pre-tax profit.
Oil producers BP and Shell led a decline in the sector as oil prices declined, with Brent crude down 0.6% to $79.55 a barrel.
On the upside, Domino’s Pizza rallied on the back of its third-quarter trading statement and GVC Holdings climbed as it posted a 28% rise in online net gaming revenue for the third quarter.
National Express pushed higher after saying it had a good summer, with its UK coach business in particular delivering "outstanding" organic growth.
Rentokil was largely flat after the pest control group said third-quarter ongoing revenue rose 11.8% to £637.4m at constant exchange rates. But the Competition and Markets Authority said it has provisionally found that Rentokil’s purchase of Cannon Hygiene could lead to higher prices or lower quality for some customers, news which follows a similar probe into another of the company's recent acquisition.
Hilton Food traded up after the meat packing business diversified by agreeing to buy a 50% stake in Dutch vegetarian product manufacturer Dalco.
In broker note action, Mediclinic was downgraded to to ‘equalweight’ at Barclays and ‘underperform’ by Bank of America Merrill Lynch. Analysts at the US bank also lifted AIM-listed Boohoo with a 'buy' recommendation.
Pearson was the standout gainer a day after the release of the education and testing group’s third-quarter update results, as Morgan Stanley upped its price target on the stock to 845p from 785p. OneSavings Bank was boosted by an upgrade to ‘outperform’ by Macquarie
Market Movers
FTSE 100 (UKX) 7,026.99 -0.39%
FTSE 250 (MCX) 18,961.35 -0.28%
techMARK (TASX) 3,338.47 0.01%
FTSE 100 - Risers
Pearson (PSON) 867.00p 3.78%
Randgold Resources Ltd. (RRS) 6,258.00p 3.20%
Diageo (DGE) 2,624.50p 2.16%
United Utilities Group (UU.) 709.00p 1.96%
GVC Holdings (GVC) 945.50p 1.72%
British Land Company (BLND) 581.80p 1.71%
Paddy Power Betfair (PPB) 6,695.00p 1.67%
Sainsbury (J) (SBRY) 304.00p 1.57%
Morrison (Wm) Supermarkets (MRW) 249.05p 1.49%
Informa (INF) 730.60p 1.42%
FTSE 100 - Fallers
CRH (CRH) 2,222.00p -4.10%
Antofagasta (ANTO) 767.40p -3.50%
Ashtead Group (AHT) 1,937.50p -3.37%
Standard Life Aberdeen (SLA) 263.00p -2.81%
Ferguson (FERG) 5,361.00p -2.74%
Bunzl (BNZL) 2,206.00p -2.74%
BAE Systems (BA.) 545.00p -2.68%
Smurfit Kappa Group (SKG) 2,550.00p -2.68%
Sage Group (SGE) 556.20p -2.66%
Smiths Group (SMIN) 1,299.50p -2.59%
FTSE 250 - Risers
National Express Group (NEX) 418.00p 5.96%
Domino's Pizza Group (DOM) 274.90p 5.45%
Softcat (SCT) 735.00p 5.00%
Contour Global (GLO) 179.40p 4.50%
On The Beach Group (OTB) 445.00p 4.34%
Drax Group (DRX) 422.00p 4.06%
OneSavings Bank (OSB) 387.20p 3.76%
Indivior (INDV) 199.50p 3.72%
Go-Ahead Group (GOG) 1,676.97p 3.28%
Tate & Lyle (TATE) 658.40p 3.07%
FTSE 250 - Fallers
Mediclinic International (MDC) 357.70p -9.21%
Capita (CPI) 123.75p -6.07%
Wizz Air Holdings (WIZZ) 2,458.00p -5.86%
Spire Healthcare Group (SPI) 112.30p -5.23%
Games Workshop Group (GAW) 3,165.00p -4.95%
Bodycote (BOY) 797.00p -4.61%
Rank Group (RNK) 156.20p -4.29%
Kier Group (KIE) 875.00p -4.16%
Metro Bank (MTRO) 2,500.00p -3.99%
Bank of Georgia Group (BGEO) 1,631.80p -3.95%