London midday: Stocks fall into the red as sterling surges
London stocks had fallen into the red by midday on Tuesday as sterling spiked higher after a senior European Court of Justice official said Britain would be allowed to unilaterally revoke Article 50.
The FTSE 100 was down 0.7% to 7,015.45, reversing earlier gains as sterling traded up 0.8% against the dollar at 1.2828 and 0.3% versus the euro at 1.1242 after ECJ advocate general Campos Sanchez-Bordona said EU law allowed the UK to revoke article 50 without the need for formal agreement from the European Commission or other EU member states.
In his formal opinion, Sanchez-Bordona said it was essential that MPs knew they could stop the Brexit process, dismissing the UK government’s claims the issue was hypothetical.
The UK government and European Commission had insisted the Brexit process could only be stopped by unanimous agreement. The commission opposed the case on the basis that it would allow states to renegotiate their membership on more favourable terms.
The opinion, which is not binding on the court, comes just a week after the case was heard at the ECJ following a referral from Scotland's highest civil court, the Court of Session.
Investors were also digesting news that MPs have secured an emergency motion accusing the government of holding parliament in contempt for failing to publish the full Brexit legal advice.
This came as Prime Minister Theresa May prepared to kick off a week of debate on her Brexit deal ahead of the 11 December vote in Parliament.
CMC Markets analyst Michael Hewson said: "While it is important to state that the opinion of the advocate general isn’t binding and is only an opinion, it does have the capacity to change the calculus about how the politics in the UK could well play out in the days and weeks ahead.
"With opposition to Prime Minister May’s Brexit deal still running high it could also change the calculus around those who are currently lining up to oppose the agreement in that if the ruling is confirmed, and it is an 'if' at this point, the ruling would effectively remove the prospect of a 'no deal' option from the table. MPs have consistently pushed back against the prospect of a 'no deal' and this opinion, if confirmed, could well offer parliament a way out in terms of a new referendum or a vote to retain the status quo, if the withdrawal agreement doesn’t pass. "
On the macro front, data out earlier showed UK construction activity strengthened last month, despite companies worrying that worries about Brexit are undermining demand.
The seasonally adjusted IHS Markit/CIPS UK construction purchasing managers' index inched up to 53.4 in November from 53.2 in October, while the market had expected a decline to 52.5. It was the eighth month in a row that the index had exceeded the 50 level that separates growth and contraction and the rise was driven by a jump in housebuilding, which was the fastest growing sub-sector last month, climbing to its strongest rate for three months.
Meanwhile, figures from Barclaycard showed consumer spending growth slowed to 3.3% year-on-year in November from 4.4% the month before, dipping to its lowest level of growth since March as department store and clothing spending contracted, but entertainment spending remained strong.
Broker notes provided much of the share price action, with BAE Systems and Rolls Royce suffering heavy losses after downgrades to 'neutral' and 'underperform', respectively, at Bank of America Merrill Lynch.
Standard Chartered was also weaker on the back of a downgrade to 'hold' at Investec, while FTSE 250 construction group Kier suffered slumped after a downgrade to 'hold' at Canaccord Genuity following the announcement of a rights issue last week.
Elsewhere, heating and plumbing equipment supplier Ferguson was on the back foot even as it reported an 8.5% rise in first-quarter revenue as North American operations offset a fall in the UK.
Russ Mould, investment director at AJ Bell, said: "Despite renaming its business from Wolseley to Ferguson last year to reflect the importance of this US brand, the plumbing and heating products distributor can’t entirely escape the problems dogging its UK division.
"Revenue and profit from this part of the group was down markedly in the first quarter of the current financial year. Although this shouldn’t detract from a strong showing for the substantially more material US arm, it does leave the company’s fortunes very much tied to the American economy, even if it is also looking to expand in Canada."
Elsewhere, IG Group retreated as it warned on first-half revenue, while there were further falls for tour operator Thomas Cook after last week's profit warning and for fashion brand Ted Baker on the back of its 'forced hugging' scandal.
On the upside, Rightmove rallied after an upgrade to 'buy' at Deutsche Bank, while BT gained as Goldman bumped the stock up to 'buy'.
Precious metals miners Fresnillo and Randgold shone as gold prices rose and Sage Group advanced as it appointed former LSE and Close Brothers executive Jonathan Howell as its new chief financial officer.
Market Movers
FTSE 100 (UKX) 7,015.45 -0.66%
FTSE 250 (MCX) 18,443.77 -0.65%
techMARK (TASX) 3,463.93 -0.56%
FTSE 100 - Risers
Fresnillo (FRES) 790.80p 2.49%
Sage Group (SGE) 589.60p 1.83%
Rightmove (RMV) 457.05p 1.78%
BT Group (BT.A) 261.00p 1.71%
Randgold Resources Ltd. (RRS) 6,360.00p 1.60%
Ocado Group (OCDO) 847.40p 1.29%
GlaxoSmithKline (GSK) 1,515.00p 1.13%
Coca-Cola HBC AG (CDI) (CCH) 2,447.00p 1.03%
Land Securities Group (LAND) 814.60p 0.99%
Diageo (DGE) 2,848.50p 0.87%
FTSE 100 - Fallers
Smurfit Kappa Group (SKG) 2,080.00p -6.31%
BAE Systems (BA.) 477.10p -4.77%
TUI AG Reg Shs (DI) (TUI) 1,108.00p -4.61%
Ferguson (FERG) 4,965.00p -4.50%
Smith (DS) (SMDS) 332.40p -3.57%
Melrose Industries (MRO) 177.35p -3.27%
Standard Chartered (STAN) 608.10p -3.08%
Rolls-Royce Holdings (RR.) 856.00p -3.06%
GVC Holdings (GVC) 754.00p -2.96%
CRH (CRH) 2,157.00p -2.88%
FTSE 250 - Risers
IP Group (IPO) 124.20p 7.25%
Brewin Dolphin Holdings (BRW) 333.20p 2.52%
BlackRock Smaller Companies Trust (BRSC) 1,230.00p 2.50%
888 Holdings (888) 169.90p 2.16%
Dechra Pharmaceuticals (DPH) 2,204.00p 2.04%
TalkTalk Telecom Group (TALK) 127.80p 1.67%
Polypipe Group (PLP) 339.60p 1.37%
Hill & Smith Holdings (HILS) 1,195.10p 1.37%
IntegraFin Holding (IHP) 299.35p 1.27%
BCA Marketplace (BCA) 213.50p 1.18%
FTSE 250 - Fallers
Thomas Cook Group (TCG) 20.60p -12.86%
Ted Baker (TED) 1,355.49p -12.55%
Kier Group (KIE) 405.90p -8.99%
IG Group Holdings (IGG) 563.00p -7.48%
AA (AA.) 87.10p -4.14%
Capita (CPI) 105.35p -4.01%
Wizz Air Holdings (WIZZ) 2,869.00p -3.92%
Ferrexpo (FXPO) 182.20p -3.55%
Mitchells & Butlers (MAB) 261.80p -3.39%
JD Sports Fashion (JD.) 379.20p -3.14%