London midday: Stocks extend losses as pound trades back above $1.41
London stocks had extended losses by midday on Tuesday as the pound gained back ground against the dollar, trading above $1.41 again despite growing concerns over Brexit.
The FTSE100 was down 0.6% to 7,623.53, while the pound was up 0.3% against the greenback to 1.4117 and 0.1% lower versus the euro at 1.1357.
GKFX analyst David Morrison said the turnaround in the pound seems surprising on the face of it given the domestic political situation.
“Today’s press reports make dismal reading for PM Theresa May, with some insisting that her position is untenable. But the pound’s strength is much more about dollar weakness. The downward trend in the greenback remains in place, despite yesterday’s bounce as short-sellers booked profits. As US Treasury Secretary Steve Mnuchin made clear last week, there are plenty of positives in having a weaker currency and for now the dollar’s path of least resistance is down.”
Bank of England governor Mark Carney is due to speak before the Lord’s Economic Affairs Committee at 1530 GMT, while US president Donald Trump’s state of the union address later in the day will also be eyed.
The pound had been under pressure earlier after a confidential Brexit impact report for the Cabinet was leaked overnight. According to confidential analysis produced for the government and leaked to Buzzfeed, Britain will be worse off under all plausible scenarios when it leaves the EU.
Bond markets were in focus after yields in Europe and the US rose on Monday following comments from European Central Bank governing council member Klaas Knot and ahead of this week’s rate announcement by the Federal Reserve.
The US 10-year US Treasury yield pushed above the 2.7% level for the first time since April 2014 and the two-year yield hit its highest level since September 2008.
Eurozone yields were driven by Knot’s comments, after he said the European Central Bank’s asset purchase programme should “as soon as possible”. He argued that there is not a single reason left to continue the quantitative easing in the euro area and said the ECB’s bond buying programme has already achieved “what could realistically be expected of it”. Some fairly hawkish rhetoric from ECB board member Benoit Coeure pushed yields higher.
Meanwhile, the move higher in US yields was prompted by the prospect that US policymakers could well revise their forecasts higher for the US economy in light of the recent tax changes brought in by the Trump administration earlier this month.
Investors were also digesting figures out earlier from the Bank of England showing that the number of new mortgages fell sharply in December as the housing market slowed down.
Mortgage approvals dropped to 61,039 last month from 64,712 in November as the number of loans fell for purchases and remortgaging. The figure was well below expectations for 63,500 approvals and was the lowest since January 2015.
The drop-off in mortgages reflects a slowdown in the housing market. High property prices, squeezed incomes and consumer wariness are deterring potential buyers, according to the Royal Institution of Chartered Surveyors.
In corporate news, Anglo American fell as it said the value of rough diamond sales for De Beers' first sales cycle of 2018 came to $665m.
Imperial Leather and Original Source maker PZ Cussons declined as it reported a drop in adjusted interim profit amid margin pressures and “tough” trading conditions, while CYBG was in the red despite posting a jump in first-quarter lending.
Irish convenience foods group Greencore reversed its earlier course to trade lower after saying revenue grew 54% in the 13 weeks to 29 December.
UDG Healthcare turned lower despite saying it expects adjusted earnings per share to rise by 18% to 21% in 2018 following strong trading in the first quarter, while Domino’s Pizza also dropped despite saying it expects annual profit to beat market forecasts after a strong performance in the fourth quarter.
Bucking the trend were only 14 of the FTSE 100, led by Informa as it confirmed the takeover of smaller events rival UBM for £3.9bn, as it looks to create a business-to-business information giant that will operate as a single business by the start of 2019.
Film and television producer and distributor Entertainment One edged up after confirming that it had raised £53m in an placing with City institutions at a price of 305p as part of its plan to snap up the rest of US television producer The Mark Gordon Company.
Zoopla and uSwitch operator ZPG was another moving higher as it reported a good start to the financial year across both divisions, with its websites and mobile apps attracting 53 million average monthly visits during the three months to 31 December.
Dechra Pharmaceuticals was boosted by an upgrade to buy at Jefferies, but Mediclinic was hit by a downgrade to neutral at UBS.
Market Movers
FTSE 100 (UKX) 7,623.53 -0.63%
FTSE 250 (MCX) 20,490.47 -0.42%
techMARK (TASX) 3,464.81 -0.37%
FTSE 100 - Risers
Informa (INF) 699.00p 1.69%
Reckitt Benckiser Group (RB.) 6,848.00p 0.90%
Rolls-Royce Holdings (RR.) 868.00p 0.70%
Relx plc (REL) 1,571.00p 0.67%
Halma (HLMA) 1,275.00p 0.63%
Pearson (PSON) 694.00p 0.52%
Rentokil Initial (RTO) 297.80p 0.47%
Coca-Cola HBC AG (CDI) (CCH) 2,409.00p 0.33%
Unilever (ULVR) 3,977.00p 0.30%
Randgold Resources Ltd. (RRS) 7,184.00p 0.22%
FTSE 100 - Fallers
Royal Bank of Scotland Group (RBS) 293.66p -2.18%
Mediclinic International (MDC) 597.00p -2.13%
Barclays (BARC) 203.35p -2.07%
Anglo American (AAL) 1,724.80p -1.78%
Persimmon (PSN) 2,576.00p -1.64%
Old Mutual (OML) 232.70p -1.57%
Glencore (GLEN) 408.65p -1.53%
Standard Chartered (STAN) 826.30p -1.48%
Antofagasta (ANTO) 938.60p -1.43%
Smurfit Kappa Group (SKG) 2,530.00p -1.40%
FTSE 250 - Risers
UBM (UBM) 908.00p 4.43%
Domino's Pizza Group (DOM) 359.90p 2.68%
Sophos Group (SOPH) 646.50p 2.46%
HICL Infrastructure Company Ltd (HICL) 148.05p 2.24%
Brown (N.) Group (BWNG) 211.60p 2.22%
John Laing Infrastructure Fund Ltd (JLIF) 118.61p 2.07%
Unite Group (UTG) 800.00p 1.91%
International Public Partnerships Ltd. (INPP) 151.20p 1.75%
Renishaw (RSW) 4,870.00p 1.46%
Softcat (SCT) 524.00p 1.35%
FTSE 250 - Fallers
Millennium & Copthorne Hotels (MLC) 522.00p -4.57%
Vectura Group (VEC) 105.30p -3.31%
Ferrexpo (FXPO) 300.40p -3.28%
IP Group (IPO) 128.80p -3.16%
Jupiter Fund Management (JUP) 590.60p -2.80%
CYBG (CYBG) 322.00p -2.78%
TBC Bank Group (TBCG) 1,640.00p -2.73%
Vedanta Resources (VED) 846.40p -2.67%
Tullow Oil (TLW) 204.90p -2.61%
BCA Marketplace (BCA) 187.20p -2.50%