London midday: Stocks drop as US futures retreat
London stocks had fallen firmly into the red by midday on Thursday, despite huge gains on Wall Street in the previous session, as US stock futures retreated.
The FTSE 100 was trading down 0.9% at 6,623.94 in thin volumes, even after the Dow surged more than 1,000 points on Wednesday, racking up its biggest one-day points gain ever. This followed Wall Street’s worst-ever performance on Christmas Eve.
In currency markets, the pound was flat against the dollar 1.2629 and down 0.4% versus the euro at 1.1068.
Stocks in the US had rallied on the back of Mastercard data showing that sales during the holiday season rose the most in six years in 2018 and after Kevin Hassett, chairman of the White House Council of Economic Advisers, affirmed that Fed chairman Jerome Powell’s job was ‘100% safe’.
Adding to the upbeat tone in the US were reports that a US government delegation will travel to Beijing in the week of 7 January to hold trade talks with Chinese officials.
Mike van Dulken, head of research at Accendo Markets, said: "Data suggests heavier than usual post-Christmas equity buying and rebalancing of US portfolios, likely exacerbated by recent share price declines offering more attractive entry points (oversold?) being capitalised upon while ‘normal’ trading volumes are holiday-thinned. The bounce by consumer discretionary and tech supports this theory."
The buoyant mood failed to spill over into UK trading, however, with stocks quickly moving lower, likely in line with a retreat in US futures.
Russ Mould, investment director at AJ Bell, said: "The FTSE 100 is treating a 5% surge in America’s S&P 500 benchmark with a good degree of caution and it is easy to see why, even if that was the eighteenth biggest single-day gain in the US index since 1970 (a total sample of nearly 12,800 trading days).
"Encouragingly, three of the seventeen other 5%-plus daily advances came immediately in the aftermath of the 1987 crash, when buying did prove a good plan, and two more in March 2009 when the S&P finally hit bottom as the Great Financial Crisis began to abate.
"But history also shows eight of the 5%-plus gains came during the bear market of 2007-2009 and three more during the market downturn of 2000-2003, to suggest there is still a risk that this year’s Boxing Day bonanza could be no more than a wicked bear trap set to lure investors into more trouble."
On home turf, a survey of company directors from the Institute of Directors did little to boost sentiment, as it revealed that business confidence in the British economy has declined to the lowest level since the EU referendum. About 57% of more than 700 company directors surveyed said they expected things to get worse, while less than 20% expected an improvement. This was the worst net score since the IoD started its confidence survey in 2016.
UK retailers were in focus, with Marks & Spencer, Debenhams and Primark owner AB Foods weaker after the latest data from Springboard showed that the number of people heading off to the Boxing Day sales has dropped for the third year running despite heavy discounting.
According to Springboard, the number of shoppers to shopping centres, high streets and retail parks had fallen 3.1%year-on-year by 1600 GMT on Wednesday.
In corporate news, Evraz slipped as it it confirmed it was looking at a potential combination of coal assets with fellow producer Sibuglemet.
The company, responding to media speculation about a joint venture, said it was exploring ways to increase the long-term security of supply of a wide range of coking coal grades required for the group's operations.
Elsewhere, contracts for differences online service provider Plus500 rose 2.4% after saying it expects its full-year performance to be ahead of expectations as the "strong momentum" reported last month continued.
Centamin lost its shine as it said gold production at its Sukari mine in Egypt will come in around 2% below full-year 2018 guidance of 480,000 ounces, following lower-than-expected production in October and November.
British American Tobacco, BT and Dixons Carphone were among the companies whose stock went ex-dividend.
Superdry was up 9.2% following reports earlier in the week that co-founder Julian Dunkerton was preparing to requisition an extraordinary general meeting to ask shareholders to reinstate him as a director.