London close: Stocks knocked lower by rebound in the pound

20 August 2019

(Sharecast News) - London stocks finished on Tuesday as sterling snapped higher after the German Chancellor said that the European Union would have to think about "practical solutions" for the Irish Backstop question.
However, she added that it was a matter for the Political Declaration and not the Withdrawal Bill, going on to say that the latter di not ned to be reopened.

"Sterling shot higher in a brief flurry of buying panic as algos were triggered by comments from Germany's Angela Merkel on Brexit," explained Neil Wilson, chief market analyst at <em></em>.

"She said Germany would think about 'practical solutions' to the backstop, adding that this is a matter of the political declaration, not of the withdrawal agreement."

The FTSE 100 was down by 0.90% at 7,125.0, having risen sharply on Monday on the back of central bank stimulus hopes and renewed optimism over Sino-US trade relations.

In the background, investors were waiting on a key speech from US Federal Reserve chairman, Jerome Powell, on Friday, while keeping an eye out for any news headlines around the ongoing US-China trade talks and protests in Hong Kong.

The pound meanwhile was adding 0.24% to 1.2156 against the US dollar, having earlier dropped to 1.2064, while against the euro it was up by 0.10% at 1.0958 and well off its intraday low of 1.0888.

Overnight, officials in Ireland and Brussels rejected Prime Minister Boris Johnson's new demand to renegotiate the Brexit deal ahead of his meetings this week with German Chancellor Angela Merkel and French president Emmanuel Macron at the G7 summit in France.

Johnson had written a letter to European Council President Donald Tusk calling for the backstop to be scrapped but Tusk rejected the plea.

Investors were also mulling over the latest survey from the <em>Confederation of British Industry</em>, which showed the UK manufacturing sector stabilised in August following a drop the previous month.

The CBI's total orders balance came in at -13 this month from -34 in July, beating expectations for a reading of -23 and in line with the long-run average. Total order books and export order books were reported as below normal, but to a lesser extent than in July.

Looking ahead, manufacturers expect output volumes to remain flat over the next three months, while output prices are seen steady and expectations for inflation are at their lowest since February 2016.

Anna Leach, CBI deputy chief economist, said: "Despite signs of stabilisation in the data this month, UK manufactures remain on the receiving end of a double whammy: the slowdown in the global economy and Brexit uncertainty. Trade tensions between nations such as China and the US only exacerbate the demand uncertainty facing UK manufacturers.

"As we get closer to October, it's crucial that the new Prime Minister secures a Brexit deal ahead of that deadline and gets on with pressing domestic priorities, from improving our infrastructure to fixing the apprenticeship levy."

In equity markets, supermarket retailers were in focus after the latest data from research firm <em>Kantar</em> showed that sales at the 'big four' fell in the 12 weeks to 11 August. <strong>Sainsbury</strong>'s shares rose, however, as it fared the best of the bunch, with sales there down just 0.6% versus a 2.7% drop at <strong>Morrisons</strong>, a 1.6% decline at<strong> Tesco</strong> and a 1.5% fall at Walmart-owned <strong>Asda</strong>.

<strong>AstraZeneca</strong> slipped despite the pharmaceuticals giant saying that results from a clinical trial of its Farxiga drug for the treatment of patients with heart failure had met its primary objective.

<strong>Persimmon</strong> was trading up even as it reported a drop in first-half profit and revenues, as it focuses on improving its customer service.

Specialist engineering company<strong> IMI</strong> gained as it announced the proposed acquisition of US valve and flow control products manufacturer PBM for $85m (&#163;70.3m).

Energy services company <strong>Wood Group</strong> gave up early gains even after saying it swung to a first-half profit and announcing the sale of its nuclear business for &#163;250m in cash, which it will use to reduce debt. The company also backed its full-year guidance.

On the downside, miner <strong>BHP</strong> retreated after it posted its best full-year figures for five years and handed out a record dividend as it cashed in on higher commodity prices, but results still fell short of expectations. Underlying profit rose to $9.12bn from $8.93bn year on year, but was still lower than expectations of $9.4bn.The company announced a dividend of 78 cents a share, meaning that it will hand back $3.9bn to investors in addition to $17bn already announced.

<strong>Market Movers</strong>

FTSE 100 (UKX) 7,125.00 -0.90%
FTSE 250 (MCX) 19,008.09 -0.47%
techMARK (TASX) 3,799.18 -0.43%

<strong>FTSE 100 - Risers</strong>

Sainsbury (J) (SBRY) 193.90p 2.95%
Prudential (PRU) 1,412.00p 0.93%
Ocado Group (OCDO) 1,208.00p 0.87%
Rolls-Royce Holdings (RR.) 768.60p 0.81%
Scottish Mortgage Inv Trust (SMT) 534.00p 0.75%
Aveva Group (AVV) 3,816.00p 0.74%
Fresnillo (FRES) 654.80p 0.55%
Whitbread (WTB) 4,240.00p 0.52%
Compass Group (CPG) 2,072.00p 0.49%
Spirax-Sarco Engineering (SPX) 7,850.00p 0.45%

<strong>FTSE 100 - Fallers</strong>

Kingfisher (KGF) 188.00p -3.19%
United Utilities Group (UU.) 775.60p -2.73%
BT Group (BT.A) 162.84p -2.71%
BHP Group (BHP) 1,734.80p -2.62%
Centrica (CNA) 64.58p -2.59%
TUI AG Reg Shs (DI) (TUI) 760.60p -2.16%
Melrose Industries (MRO) 163.75p -2.15%
NMC Health (NMC) 1,863.00p -2.11%
National Grid (NG.) 850.30p -2.03%
Direct Line Insurance Group (DLG) 293.00p -2.01%

<strong>FTSE 250 - Risers</strong>

Mitchells &amp; Butlers (MAB) 350.00p 8.02%
Charter Court Financial Services Group (CCFS) 291.50p 5.23%
OneSavings Bank (OSB) 355.40p 5.15%
Amigo Holdings (AMGO) 152.20p 3.40%
Entertainment One Limited (ETO) 413.60p 3.35%
Marston's (MARS) 118.40p 2.96%
St. Modwen Properties (SMP) 400.00p 2.56%
Plus500 Ltd (DI) (PLUS) 730.00p 2.24%
Kainos Group (KNOS) 508.00p 2.21%
Aston Martin Lagonda Global Holdings (AML) 468.90p 2.16%

<strong>FTSE 250 - Fallers</strong>

Funding Circle Holdings (FCH) 114.00p -7.47%
Balfour Beatty (BBY) 212.00p -6.19%
Royal Mail (RMG) 189.65p -5.08%
Wood Group (John) (WG.) 430.40p -4.53%
CYBG (CYBG) 141.90p -4.52%
IP Group (IPO) 58.60p -4.38%
Intu Properties (INTU) 34.77p -4.35%
IG Group Holdings (IGG) 533.40p -4.17%
Clarkson (CKN) 2,455.00p -3.73%
Metro Bank (MTRO) 273.60p -2.77%