Oliver Haill Sharecast | 09 Aug, 2017 09:14 - Updated: 09:33
London open: Risk-off mode hits stocks after Trump's North Korea threat
London stocks lurched lower on Wednesday morning after geopolitical tensions between American and North Korea were further inflamed by some hotheaded rhetoric from President Donald Trump.
After close to an hour of trading on a day that some are calling the 10-year anniversary of the dawn of the financial crisis, the FTSE 100 lost 40.66 points or 0.54% to 7,502.07, having quickly found a floor following an initial dip.
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."
The price of gold rose, but Wilson pointed out it was only trading at its highest since Friday – "it doesn’t look like much risk is being taken away yet".
Nevertheless, precious metals miners Fresnillo, Randgold Resources and Acacia Mining were lifted to the top of the FTSE leaderboard.
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.
That prompted analysts at Capital Economics to tell 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."
Traders were also keeping close tabs on the US dollar, with Michael Hewson, chief market analyst at CMC Markets, saying: "It has started to become apparent to some in recent days that the US dollar, after five months of losses, may be susceptible to some kind of rebound, and yesterday’s price action would appear to confirm that there are some weak short positions out there."
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.
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.
Security outsourcing group G4S was down more than 6% as 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) 1,497.00p 1.70%
Randgold Resources Ltd. (RRS) 7,300.00p 1.67%
Mediclinic International (MDC) 735.50p 1.03%
Worldpay Group (WPG) 385.60p 0.52%
Vodafone Group (VOD) 226.35p 0.40%
Antofagasta (ANTO) 964.00p 0.26%
Imperial Brands (IMB) 3,261.00p 0.11%
Next (NXT) 4,371.00p 0.07%
Unilever (ULVR) 4,414.00p 0.07%
Experian (EXPN) 1,532.00p 0.07%
FTSE 100 - Fallers
G4S (GFS) 313.10p -5.29%
Convatec Group (CTEC) 286.30p -1.92%
Legal & General Group (LGEN) 271.60p -1.59%
Johnson Matthey (JMAT) 2,766.00p -1.53%
Smurfit Kappa Group (SKG) 2,190.00p -1.53%
Pearson (PSON) 619.00p -1.43%
WPP (WPP) 1,569.00p -1.38%
Rolls-Royce Holdings (RR.) 937.00p -1.37%
CRH (CRH) 2,662.00p -1.30%
ITV (ITV) 172.80p -1.26%
FTSE 250 - Risers
Acacia Mining (ACA) 182.10p 3.29%
Spirax-Sarco Engineering (SPX) 5,710.00p 2.42%
TBC Bank Group (TBCG) 1,664.00p 2.09%
Hastings Group Holdings (HSTG) 326.50p 1.49%
Nostrum Oil & Gas (NOG) 423.70p 1.49%
Polymetal International (POLY) 917.00p 1.38%
Hochschild Mining (HOC) 317.20p 1.21%
Indivior (INDV) 405.10p 1.20%
Daejan Holdings (DJAN) 6,450.00p 1.18%
Kaz Minerals (KAZ) 742.00p 1.02%
FTSE 250 - Fallers
Ladbrokes Coral Group (LCL) 123.50p -3.59%
Sanne Group (SNN) 732.00p -2.40%
Grafton Group Units (GFTU) 766.50p -2.23%
Essentra (ESNT) 539.50p -2.18%
Aldermore Group (ALD) 216.90p -1.90%
Big Yellow Group (BYG) 749.50p -1.38%
FirstGroup (FGP) 115.30p -1.37%
Serco Group (SRP) 109.40p -1.35%
Euromoney Institutional Investor (ERM) 1,125.00p -1.32%
Safestore Holdings (SAFE) 414.70p -1.26%