London midday: Stocks slide as geopolitical tensions simmer
London stocks stumbled on Wednesday as geopolitical tensions between American and North Korea were brought to the boil by some hotheaded threats from President Donald Trump.
Just after midday, the FTSE 100 had lost just over 56 points or 0.75% to 7,486.06, having found support just below that level following an initial dip.
Sterling was flat against the dollar at 1.2990 after earlier wavering, but gained 0.1% on the euro to 1.1066, with the single currency down by a similar degree against the greenback, which in turn was down 0.6% against the yen.
Overnight US and Asian stock markets slipped into risk-off mode late on, as Trump warned North Korea would be "met with fire and fury and, frankly, power the likes of which the world has never seen before" if it continues to threaten the US.
The VIX volatility index, having recently hit an all-time low, spiked from 9.54 just after Europe went home and around 10 when the comments were reported to a peak of 11.29 with 30 minutes left in the session before closing at 10.96.
This move in the Vix was only to a level last seen a month ago, while the Dow gave up a paltry 33 points - that after a streak of nine-straight record closes - said analyst Neil Wilson at ETX Capital, noting that European stock indices were all in the red.
"That said other riskier assets have quickly found bid again and stocks may therefore recover pretty sharpish if this proves no more than a temporary war of words. Indeed overall the risk-off moves are not enormous for the time being, but we await developments," he said.
Craig Erlam at Oanda said safe haven assets were likely to benefit.
"Equity markets in Europe are down more than 1% in most cases and Wall Street is also facing a negative open, as investors turn away from perceived riskier instruments in favour of the traditional safe havens. Gold – the ultimate safe haven instrument – is up around 0.6% so far on the day and could extend these gains if investor sentiment continues to deteriorate," he said.
"The yen, despite Japan being in the thick of it, is also seeing plenty of safe haven flows although it’s the Swiss Franc which is proving to be the biggest winner in all of this, trading around 1% higher against the US dollar, euro and pound. It will be interesting to see if the yen maintains its safe haven status should this continue to escalate into something far more serious than just the war of words it currently is."
Gold miners Fresnillo, Randgold Resources and Acacia Mining were lifted to the top of the FTSE leaderboard, though all other mining heavyweights were in the red.
Asia-focused financial stocks, namely Prudential and Standard Chartered were among the main fallers.
On what is a fairly quiet day in terms of macroeconomic data, the overnight release of Chinese consumer prices showed gains slowed from 1.5% year-on-year in July to 1.4% for June.
Capital Economics told clients: "Rising steel prices aside, broader price pressures appear to have cooled last month. We expect the reflation of the past year to continue to fizzle out in coming quarters as policy tightening dampens economic activity."
In company news, payments processing company Worldpay was on the rise as it had agreed a £9.3bn merger with US rival Vantiv. Worldpay shareholders have been offered 0.55p a share in cash, 0.0672 of a new Vantiv share and a 4.2p dividend. Worldpay investors will own 43% of the combined group, up from the 41% initially mooted.
Also higher was Spirax-Sarco as interim pre-tax profits at engineering group spurted up 21% to £88.5m as revenue grew 25% to £428.6m. The collapse of sterling after the Brexit vote last year helped boost profits by 16%, the company said, adding that strong UK operations and acquisitions had also contributed to the rise.
Life insurer Legal & General posted a 43% jump in half-year profits before tax to £952m, which saw earnings per share rise from 11.27p in the year-ago period to 15.94p. In turn, the company's payout was raised from 4.0p to 4.3p. Its shares were caught up in the general risk-off mood, however. Fellow life insurers Aviva and Standard Life were also lower.
General insurer Hastings was modestly higher after reporting continued “strong momentum” through its first half, adding it was on track for another year of “profitable growth” as gross written premiums improved 28% to £462m. Solid numbers were driven by better than expected motor underwriting results which offset weaker investment income. Sector peer Direct Line was in the red however.
Security outsourcing group G4S was the biggest faller after it reported slower than expected growth in the second quarter but held its first-half dividend steady, as management declared their increased confidence in prospects thanks to the "substantial progress" being made with restructuring. Revenue of ongoing business rose 6.2% to £3.7bn and earning per share was up 7.8% to 8.3p.
FTSE 100 - Risers
Fresnillo (FRES) 1,516.00p 2.99%
Randgold Resources Ltd. (RRS) 7,355.00p 2.44%
Mediclinic International (MDC) 736.00p 1.10%
BAE Systems (BA.) 581.00p 0.96%
Vodafone Group (VOD) 226.85p 0.62%
Barratt Developments (BDEV) 602.50p 0.33%
Associated British Foods (ABF) 3,164.00p 0.32%
United Utilities Group (UU.) 922.50p 0.27%
Worldpay Group (WPG) 384.50p 0.23%
Severn Trent (SVT) 2,289.00p 0.22%
FTSE 100 - Fallers
G4S (GFS) 314.00p -5.02%
Prudential (PRU) 1,836.00p -2.63%
Standard Chartered (STAN) 784.70p -2.40%
Ashtead Group (AHT) 1,620.00p -2.35%
Legal & General Group (LGEN) 269.60p -2.32%
Aviva (AV.) 525.50p -2.14%
Direct Line Insurance Group (DLG) 402.70p -2.09%
St James's Place (STJ) 1,203.00p -2.04%
Standard Life (SL.) 433.10p -2.04%
Johnson Matthey (JMAT) 2,756.00p -1.89%
FTSE 250 - Risers
Acacia Mining (ACA) 195.50p 10.89%
Pets at Home Group (PETS) 189.00p 3.79%
Hochschild Mining (HOC) 324.90p 3.67%
SIG (SHI) 171.10p 3.38%
Polymetal International (POLY) 932.00p 3.04%
Millennium & Copthorne Hotels (MLC) 467.30p 2.55%
Petra Diamonds Ltd.(DI) (PDL) 96.70p 2.55%
Spirax-Sarco Engineering (SPX) 5,710.00p 2.42%
Just Group (JUST) 150.00p 2.25%
Galliford Try (GFRD) 1,356.00p 2.03%
FTSE 250 - Fallers
Ladbrokes Coral Group (LCL) 121.00p -5.54%
Essentra (ESNT) 522.50p -5.26%
Elementis (ELM) 278.50p -3.27%
Riverstone Energy Limited (RSE) 1,313.00p -2.81%
Sanne Group (SNN) 729.00p -2.80%
Renishaw (RSW) 4,313.00p -2.79%
Marshalls (MSLH) 389.80p -2.79%
Aldermore Group (ALD) 215.20p -2.67%
Euromoney Institutional Investor (ERM) 1,110.00p -2.63%
Virgin Money Holdings (UK) (VM.) 286.10p -2.45%