London close: Stocks slip as pound feeds on Brexit meeting scraps
London stocks lost ground on Tuesday as miners, oil producers and defensive stocks all slipped, with tentative optimism around Brexit offset by uncertainty over the political standoff between Italy and the EU and around US mid-term elections.
The FTSE 100 fell 63 points or 0.9% to 7,040.68, while the pound perked up in the afternoon, rising 0.4% against the dollar to 1.3091 and 0.25% higher versus the euro at 1.1460, after some positive noises emerged after the Prime Minister sat down with her cabinet.
Ministers were told be ready for another cabinet meeting, possibly at end of this week, reporters were told, with the second meeting to agree UK's compromise Irish border proposal before it is then put to the EU's chief negotiator Michel Barnier
Trade secretary Liam Fox said the cabinet was "hopeful" of a deal, telling ITV that signing a deal in November or December "would be enough time to make the preparations we need", while Brexit Secretary Dominic Raab told the BBC it was "thumbs up".
The pound's reaction to such meagre scraps shows the unpredictability and heightened sensitivity that makes GBP trading particularly difficult, said Joshua Mahony, market analyst at IG. "Speculation points towards support for a UK-wide customs union backstop. However, coming hot off the tails of a Channel 4 survey which highlighted a shift in sentiment towards remain, we are seeing Raab and May negotiate a deal which barely represents the original concept of Brexit, let alone what people want now."
Meanwhile, the impending US mid-term elections were likely to be keeping investors jittery.
"It appears unlikely that the Democrats can take control of the Senate due to 26 of the 35 seats up for re-election already being in their possession so a split Congress is seen as the expected outcome," said David Cheetham, chief market analyst at XTB. "Given what happened back in 2016 when Trump’s victory shocked the world with an outcome that was contrary to the polls, investors appear to be understandably treading carefully ahead of the vote, in a case of 'once bitten twice shy'."
Back on home shores, the latest survey from the British Retail Consortium and KPMG showed that retail sales rose 0.1% on the month in October on a like-for-like basis, with total sales up 1.3% on the year.
Chief executive Helen Dickinson said: "Brighter weather and the anticipation of better deals in the Black Friday November sales have dampened demand for discretionary purchases. Moreover, low real wage growth over an extended period has left consumers with less money in their pocket, squeezing retailers’ margins in the face of higher costs.
"Furthermore, the very real possibility of a no-deal Brexit presents a huge challenge for retailers who must contend with the prospect of higher import prices, and further drops to consumer demand."
In UK corporate news, Morrisons was the standout loser as it said further strong expansion of its wholesale arm lifted sales at in the third quarter, but growth slowed from the rapid rate in the preceding quarter. Group like-for-like sales were up 5.6% in the 13 weeks to 4 November, excluding fuel, as the supermarkets business grew 1.3% and the wholesale business 4.3%. Sector peers Tesco and Sainsbury's were also dragged into the red.
Imperial Brands reversed earlier gains after the tobacco company said full-year operating profits rose 5.7% to £2.4bn, but it took a hit from a write-off relating to its bankrupt Palmer & Harvey (P&H) distribution operation. “The role of the Gilt yield cannot be underestimated," said Russ Mould, investment director at AJ Bell, pointing to the share price's strong inverse relationship with government bond yields.
“This is all part of the natural market cycle," he added. "Investors must then decide at what stage do they think Imperial’s shares are over-sold, given that the firm has increased its annual shareholder dividend at a double-digit rate in every year but two since 1997. The shares offer a historic yield of 7% and analysts are predicting further dividend growth for the year to September 2019. Against that, sceptics will argue that the past may not be a good guide to the future as regulatory and health concerns weigh on demand for tobacco and stick volumes continue to gently decline."
BT remained in the red following a brief spike higher as rumours swirled again that Deutsche Telekom - which has a stake in the company - has been working with advisors on plans for a full takeover.
William Hill slumped after the bookmaker warned that 2018 profit would be down on last year as its online business takes a hit from regulatory and tax changes, while weaker footfall and challenging high street conditions also weigh.
A day ahead of a shareholder vote on its proposed merger with Canada's Barrick Gold, Randgold Resources could not hold onto mid-session gains as it revealed third-quarter net profits up 26% as a decline in production costs boosted earnings. Gold production for the three month period dropped by 1.5%, but the cost per ounce of production fell by 16%.
On the upside, Associated British Foods was the top gainer as it reported stronger earnings per share for the year to September but said it expects growth to be flat in the coming year. Strong growth from its Primark retail arm, along with its grocery, agriculture and ingredients divisions, offsetting a decline in the sugar business, resulted in adjusted profits before tax of £1.37bn and adjusted earnings per share of 134.9p, up 5% and 6% respectively. Elsewhere in the retail sector, Marks & Spencer was on the front foot a day ahead of results.
Direct Line edged up after the non-life insurer posted a 5.8% drop in third-quarter gross written premiums but said it was on track to meet its goals for 2018.
Packaging company DS Smith gained after saying it expects return on sales and adjusted operating profit in the half year to the end of October to be "materially" ahead of the same period a year ago.
Hikma Pharmaceuticals was given a shot in the arm as Barclays upgraded the stock to 'equalweight', while Flybe was lifted to 'buy' at HSBC.
FTSE 100 - Risers
Associated British Foods (ABF) 2,460.00p 3.02%
Marks & Spencer Group (MKS) 302.50p 1.65%
Direct Line Insurance Group (DLG) 322.70p 1.48%
Smith (DS) (SMDS) 385.10p 1.24%
Experian (EXPN) 1,791.00p 1.07%
Centrica (CNA) 149.30p 0.98%
Royal Bank of Scotland Group (RBS) 245.00p 0.91%
Rentokil Initial (RTO) 309.70p 0.85%
St James's Place (STJ) 1,022.50p 0.74%
Rolls-Royce Holdings (RR.) 828.40p 0.66%
FTSE 100 - Fallers
BT Group (BT.A) 251.00p -4.49%
Morrison (Wm) Supermarkets (MRW) 244.50p -3.95%
CRH (CRH) 2,239.40p -3.66%
Glencore (GLEN) 311.60p -2.88%
Vodafone Group (VOD) 146.28p -2.74%
Melrose Industries (MRO) 167.50p -2.62%
Just Eat (JE.) 618.40p -2.61%
InterContinental Hotels Group (IHG) 3,991.00p -2.61%
Tesco (TSCO) 212.70p -2.39%
Rightmove (RMV) 450.65p -2.38%
FTSE 250 - Risers
IWG (IWG) 254.80p 7.56%
Spire Healthcare Group (SPI) 135.40p 6.12%
Weir Group (WEIR) 1,588.50p 5.06%
Bank of Georgia Group (BGEO) 1,683.00p 4.29%
Sanne Group (SNN) 608.00p 3.58%
Synthomer (SYNT) 457.20p 3.53%
EI Group (EIG) 176.80p 3.39%
Quilter (QLT) 124.82p 3.23%
Indivior (INDV) 209.10p 3.12%
Babcock International Group (BAB) 598.00p 3.03%
FTSE 250 - Fallers
William Hill (WMH) 200.70p -6.04%
Mediclinic International (MDC) 368.00p -5.76%
Just Group (JUST) 87.95p -4.79%
Vivo Energy (VVO) 109.42p -4.60%
CYBG (CYBG) 254.20p -4.08%
Centamin (DI) (CEY) 92.20p -3.72%
Travis Perkins (TPK) 1,092.00p -3.36%
IP Group (IPO) 111.40p -3.30%
Kaz Minerals (KAZ) 530.40p -3.21%
Sophos Group (SOPH) 462.20p -3.06%