London close: Stocks fail to hold onto gains after Davis' Brexit ultimatum
London stocks could not keep a grip on their earlier gains on Thursday, weighed down as the pound whipsawed on Brexit rumours and after kicking-off the day’s trading an hour late following a technical glitch at the London Stock Exchange.
The FTSE 100 finished down almost eight points or 0.1% at 7,704.40, as sterling struggled for direction. The pound, which when stronger tends to dent the top-flight index as around 70% of the index's constituents derive their earnings from overseas, initially hit a two-and-a-half week high against the dollar, trading up above 1.346, before falling back and then rallying again. Against the euro, the pound sank close to multi-week lows around 1.132 but bounced back a bit to 1.1365.
Early gains were from the weakening in the dollar but the wobbles began as Brexit stories filtered from Westminster, with Brexit secretary David Davis threatening to resign in protest against Theresa May’s plans for a 'backstop' to cover the Northern Irish border. Reports emerged that the former SAS reservist had won the battle.
"David Davis dealt a blow to the pound this afternoon, by forcing Theresa May to add a time limit to the Brexit backstop plan," said market analyst Connor Campbell at SpreadEx.
"A cap on how long the fall-back option – designed to avoid creating a hard border in Northern Ireland if a deal isn’t agreed – would be in place has been read as Davis nudging the country further away from a ‘soft’ Brexit, something that has upset sterling."
Focusing on financial markets, Chris Beauchamp at IG said: "Today feels like a sell-off in search of a reason. It is disconcerting to see FTSE 100 rallies sold so consistently, with another push above 7740 bringing out the bears, and European markets continue to struggle in the face of a stronger euro."
He noted that it was unfortunate for FTSE 100 bulls that Thursday is ex-dividend day, with a weight on the benchmark and its mid-cap sibling, led by Vodafone and Sainsbury both going ex-div.
Otherwise, Beauchamp pointed out that the London index would have extended a lead over its continental brethren for a change. "The ongoing failure to break the highs of the week will send a worrying signal, but with more UK economic data on the way next week perhaps a weaker pound will arrive in due course to rescue the index."
Assisting the pound, thirty minutes before the session close, the Bank of England's David Ramsden told an audience that the Monetary Policy Committee's view that economic weakness during the first three months of the year was 'transitory' had been vindicated by the data - at least thus far.
"It is still early days. We are still only two thirds of the way through Q2, less far through the Q2 data cycle, and only a month has passed since our last MPC meeting. Even so, the data we have had so far suggests our interpretation of the slowdown in Q1 as temporary looks to be being borne out," he said at the Barclays Inflation conference.
Elsewhere on the macroeconomic front, data from mortgage provider Halifax showed that house prices were up 1.9% in the three months to May compared to a year ago, down from 2.2% growth in April but in line with expectations.
On a monthly basis, prices were up 1.5% last month following a 3.1% drop in April, beating expectations for a 1% gain.
The Halifax index has been extremely volatile recently, with May’s rise following a sharp 3.1% drop in April and after a 1.6% increase in March, "but the underlying trend looks broadly flat," said Sam Tombs at Pantheon Macroeconomic.
"On a three-month on three-month basis, prices rose by a mere 0.2%. The trend looks set to remain weak, given that mortgage rates are creeping up and households remain cautious about making large financial commitments. Note that Rightmove’s measure of year-over-year growth in online asking prices slowed to 1.1% in May, from 1.6% in April, while RICS reported in April that a small majority of surveyors expected house prices to fall over the following three months."
In company news, energy stocks were on the up, with BP and Shell atop the leaderboard as Brent crude oil rallied 2% to $76.89.
Shares in Auto Trader rallied as its full-year revenue and pre-tax profit parked up roughly parallel with City forecasts, with the online vehicle marketplace company's total dividend better than expected.
SSE advanced after investors shrugged at energy watchdog Ofgem forcing the energy company to pay £1m to a consumer redress fund after it providing some prepayment meter customers with inaccurate information.
Intertek gained a few pennies after saying it has acquired a UK and Malaysia-based network security and assurance services provider for an undisclosed sum.
Facilities management company Mitie rose as it impressed investors with full year results after what was a turbulent turnaround year.
Kier Group slumped despite announcing the establishment of a joint venture with Homes England and Cross Keys Homes, to develop around 5,400 homes across the country over the next ten years. Having more of an influence on the shares, Barclays initiated the stock at ‘underweight’ in a note on construction services which also saw rival Balfour Beatty fall as it was started at ‘equal-weight’. Most preferred by analysts was Keller, which was given an ‘overweight’ rating.
Ladbrokes owner GVC Holdings was bumped up to ‘outperform’ at Credit Suisse, which cut rival Paddy Power was cut to ‘underperform'.
Top of the FTSE 250 was Alfa Financial Software as it bounced back from its profit warning last week, while Capita was a high climber after Citi lifted the outsourcer to ‘buy’.
On The Beach was also in the black after it was upgraded to ‘buy’ at Numis, while EasyJet was upped to ‘outperform' at Exane.
Mediclinic International, which will drop out of the FTSE 100 when the index is reshuffled at next Friday's close, was the worst faller among the blue chips as it was downgraded to ‘hold’ at Investec.
Elsewhere, Ryanair was cut to ‘neutral’ by Exane and to ‘hold’ by Deutsche Bank, prepared food producer Bakkavor was downgraded to ‘underweight’ by Morgan Stanley and Marks & Spencer was downgraded to ‘reduce’ at AlphaValue.
Ascential was in the red as it said was trading in line with expectations for the full year but revealed tough times for its Cannes Lions event.
Market Movers
FTSE 100 (UKX) 7,704.40 -0.10%
FTSE 250 (MCX) 21,154.71 -0.08%
techMARK (TASX) 3,522.76 -0.70%
FTSE 100 - Risers
BP (BP.) 589.60p 2.20%
United Utilities Group (UU.) 786.40p 1.97%
Royal Dutch Shell 'A' (RDSA) 2,621.00p 1.51%
NMC Health (NMC) 3,490.00p 1.45%
Royal Dutch Shell 'B' (RDSB) 2,701.00p 1.35%
Informa (INF) 818.40p 1.16%
Scottish Mortgage Inv Trust (SMT) 528.50p 1.15%
Royal Mail (RMG) 492.10p 1.11%
Standard Life Aberdeen (SLA) 364.00p 0.97%
Sage Group (SGE) 678.40p 0.89%
FTSE 100 - Fallers
Mediclinic International (MDC) 555.40p -5.70%
Vodafone Group (VOD) 187.52p -4.63%
Sainsbury (J) (SBRY) 303.60p -3.03%
Burberry Group (BRBY) 2,116.00p -2.80%
Compass Group (CPG) 1,564.00p -2.38%
Old Mutual (OML) 226.90p -2.37%
Paddy Power Betfair (PPB) 8,645.00p -2.32%
Evraz (EVR) 513.40p -1.87%
Anglo American (AAL) 1,882.00p -1.70%
Glencore (GLEN) 394.05p -1.59%
FTSE 250 - Risers
Alfa Financial Software Holdings (ALFA) 210.50p 18.26%
Auto Trader Group (AUTO) 385.00p 8.76%
Capita (CPI) 150.05p 7.52%
On The Beach Group (OTB) 512.00p 6.00%
Ocado Group (OCDO) 955.60p 3.78%
Pennon Group (PNN) 781.40p 3.77%
Euromoney Institutional Investor (ERM) 1,450.00p 3.28%
Renewi (RWI) 85.10p 3.13%
FDM Group (Holdings) (FDM) 1,064.00p 2.90%
McCarthy & Stone (MCS) 130.80p 2.51%
FTSE 250 - Fallers
Kier Group (KIE) 998.00p -7.68%
Stobart Group Ltd. (STOB) 233.00p -6.05%
Ascential (ASCL) 415.80p -4.55%
Marshalls (MSLH) 419.60p -4.19%
Ultra Electronics Holdings (ULE) 1,551.00p -4.12%
Clarkson (CKN) 2,570.00p -3.20%
Travis Perkins (TPK) 1,431.00p -3.02%
William Hill (WMH) 313.00p -2.89%
Intu Properties (INTU) 197.85p -2.82%
Balfour Beatty (BBY) 302.50p -2.76%