London midday: No Santa rally as stocks turn lower
London stocks had fallen into the red by midday on Friday, with a Santa rally unlikely to materialise following more losses on Wall Street overnight, amid souring relations between the US and China and the prospect of a US government shutdown.
The FTSE 100 was down 0.3% at 6,689.60, languishing around its lowest level in more than two years, while the pound was steady against the dollar at 1.2661 and 0.2% firmer versus the euro at 1.1083.
Sino-US relations weighed on sentiment after the US Justice Department filed charges overnight accusing two members of a Chinese cyber-espionage group of hacking into dozens of US tech and industry giants.
It has been alleged that the two individuals were operating in conjunction with the Chinese government, although this has been denied by Beijing.
Meanwhile, rising odds of a US government shutdown also dented the mood, as President Trump and congressional Democrats remained at odds over $5bn funding for his border wall with Mexico.
David Cheetham, chief market analyst at XTB, said: "December has traditionally been a good month for the benchmark in recent years, with gains seen in eight of the past 10 years, but it would take something pretty spectacular to see a monthly rise now. The size of the selling is not as dramatic as the drop seen across the Atlantic where US markets have swooned of late, but price is still down by around 4% on the month, meaning somewhere in the region of £60bn has been wiped of the value of the UK’s leading companies.
"You have to go back to 2002 to find a worse drop for the UK index in the month of December, while there’s very few who will remember the last time the Wall Street fell this hard in the final month of the year, with the current drop the largest since 1931 - when the Great Depression was taking a major toll."
Brexit was still very much in focus as the UK government instructed firms to begin planning for a no-deal scenario, as the expected rejection of Theresa May’s Brexit proposal meant a messy divorce from the EU looked increasingly likely.
On the data front, lacklustre UK economic growth was confirmed, though last year's figure was upgraded.
UK gross domestic product growth for the third quarter of the year was confirmed at 0.6% compared to the preceding quarter and 1.5% compared to the third quarter last year. This final update from the Office for National Statistics was unchanged from the previous reading.
The ONS did revise up the real GDP growth reading for 2017 to 1.8% from 1.7%
Meanwhile, the latest GfK survey showed that UK consumer confidence fell to a five-year low in December.
GfK's long-running consumer confidence index slipped to -14 this month from -13 in November, in line with expectations, with three of the five measures used to calculate the overall scored down, and two up.
Client strategy director Joe Staton said: "In the face of ever-rising costs, and the threat of higher inflation combined with uncertainty around the outcome of the Brexit negotiations, it’s no surprise that consumers are in a chilly mood of despondency and putting on a glum face when they look at the prospects for 2019."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the drop in consumers’ confidence to a five-year low provides a very clear signal that the "calamitous" Brexit process will weigh heavily on GDP growth in the fourth quarter.
"Looking ahead, consumers likely will remain despondent until a no-deal Brexit is averted, but the outlook for rising real wage growth, as inflation falls further, and further marginal declines in unemployment suggests that consumers should be more upbeat in six months’ time."
In corporate news, Vodafone fell after saying it was looking for new auditors to replace Price Waterhouse, who are taking the company to court as part of a legal dispute over the collapse of Phones4U a few years ago.
Plastic packaging specialist RPC Group slipped after pushing back the deadline once again for private equity firm Apollo Global Management to make a takeover offer.
Centrica nudged lower after the British Gas owner said it would mount a legal challenge against the upcoming energy price cap, arguing that it has not been fairly calculated.
On the upside, miners were the best performers on the FTSE 100, with Antofagasta, Anglo and Glencore all higher as copper prices rose.
Anglo American was also in focus as it said it had restarted operations at its Minas-Rio iron ore operation in Brazil after the discovery of two leaks in a slurry pipeline earlier in the year led to a shutdown.
Just Eat was the standout gainer, however, as Takeaway.com agreed to buy larger rival Delivery Hero's Germany business in a €930m deal.
JD Sports rallied on positive read-across after Nike released better-than-expected second-quarter earnings overnight and upped its guidance.
Peel Hunt said: "It is very clear to us that JD is seen as a key driver of Nike profitability, but on a slightly separate note it was interesting to hear that Nike considers that apparel is an 'extraordinary opportunity for growth', and that merchandising 'head to toe' looks is key.
"We have a very strong view that JD will make a success of selling apparel in the US. So Nike goes from strength to strength, and so does JD, we think."
Market Movers
FTSE 100 (UKX) 6,689.60 -0.33%
FTSE 250 (MCX) 17,438.98 -0.05%
techMARK (TASX) 3,300.94 -0.38%
FTSE 100 - Risers
Just Eat (JE.) 595.00p 4.06%
Antofagasta (ANTO) 778.00p 2.77%
GVC Holdings (GVC) 693.95p 2.50%
CRH (CRH) 2,011.00p 2.00%
Royal Mail (RMG) 281.80p 1.99%
Anglo American (AAL) 1,735.40p 1.89%
Halma (HLMA) 1,332.00p 1.83%
Smith (DS) (SMDS) 300.40p 1.73%
Glencore (GLEN) 288.90p 1.48%
Taylor Wimpey (TW.) 136.68p 1.43%
FTSE 100 - Fallers
BT Group (BT.A) 244.55p -2.20%
DCC (DCC) 5,840.00p -2.01%
Vodafone Group (VOD) 156.81p -1.97%
Smurfit Kappa Group (SKG) 2,048.00p -1.92%
Land Securities Group (LAND) 814.40p -1.55%
National Grid (NG.) 785.00p -1.38%
Reckitt Benckiser Group (RB.) 6,130.00p -1.37%
Compass Group (CPG) 1,618.00p -1.34%
British American Tobacco (BATS) 2,521.50p -1.23%
NMC Health (NMC) 2,670.00p -1.18%
FTSE 250 - Risers
Keller Group (KLR) 499.50p 4.28%
JD Sports Fashion (JD.) 330.21p 3.68%
Inchcape (INCH) 553.00p 2.88%
Renishaw (RSW) 4,134.00p 2.78%
Vivo Energy (VVO) 131.34p 2.74%
Kaz Minerals (KAZ) 529.60p 2.68%
Amigo Holdings (AMGO) 263.70p 2.61%
Countryside Properties (CSP) 289.80p 2.55%
Brewin Dolphin Holdings (BRW) 322.00p 2.35%
AA (AA.) 72.22p 2.32%
FTSE 250 - Fallers
Bakkavor Group (BAKK) 143.80p -3.36%
IP Group (IPO) 112.20p -3.28%
Inmarsat (ISAT) 400.90p -2.91%
Hikma Pharmaceuticals (HIK) 1,706.50p -2.87%
Hunting (HTG) 451.20p -2.63%
Stagecoach Group (SGC) 131.70p -2.59%
TI Fluid Systems (TIFS) 159.80p -2.56%
Ted Baker (TED) 1,501.00p -2.53%
Clarkson (CKN) 1,926.00p -2.43%
JPMorgan Indian Investment Trust (JII) 692.10p -2.25%