London close: Stocks slip on US-China trade concerns, strength in Sterling

London stocks finished in the red on Wednesday as concerns about trade tensions between the US and China and a downbeat assessment of the UK manufacturing sector weighed on sentiment.

The FTSE 100 was down 0.85% to 6,842.88 as the pound rose 0.87% against the US dollar to 1.30652 and by 0.58% versus the euro to 1.1468 - hitting its best level since mid-November against both currencies - amid hopes that a no-deal Brexit will be avoided.

David Cheetham, chief market analyst at XTB, said: "Reports that the Labour party are set to back an amendment designed to eliminate the prospect of a no-deal Brexit has provided more good news for sterling bulls, and the market is back trading at its highest level since November."

Trade Secretary Liam Fox argued earlier that delaying or cancelling Brexit would be a "calamitous" breach of trust with the electorate and worse than a no-deal scenario.

Speaking on BBC Radio 4's Today programme, he said: "I think you need to think about the political consequences as well as the short-term economic consequences."

This came after shadow chancellor John McDonnell said the Labour party would "inevitably" back a second referendum if the party is unable to force a general election.

Worries about Sino-US relations resurfaced following reports late on Tuesday that the White House had cancelled a planned trade meeting this week with Chinese officials due to ongoing disagreements over intellectual property rules. The reports were later refuted by Trump's economic advisor Larry Kudlow.

Meanwhile, the latest quarterly trends survey from the Confederation of British Industry showed the outlook for the UK manufacturing sector was the worst this month since the Brexit vote.

The CBI's monthly gauge of industrial orders fell to -1 this month from +8 in December, missing expectations for a reading of +5.

The gauge of manufacturing expectations declined to -23 in the three months to January from -16 in the period to October, marking its lowest level since July 2016. Meanwhile, optimism about export prospects for the year ahead deteriorated at the fastest pace since January 2009.

Anna Leach, head of economic intelligence at the CBI, said: "The manufacturing sector is clearly feeling the pinch of Brexit uncertainty, with worsening business sentiment coinciding with an ongoing reluctance to invest in new facilities, machinery, innovation and training. Notwithstanding continued growth in output, these underwhelming figures in part reflect businesses’ continuing desire for clarity.

"With uncertainty risking paralysis among manufacturers, it is vital for politicians to compromise and break the Brexit deadlock, paving the way for UK manufacturers to continue trading in global markets with minimal disruption."

In corporate news, Metro Bank shares were in free-fall as it said underlying pre-tax profit for 2018 grew by 138% to £50m - around 16% below analysts' expectations.

Other financials were in the red too, with wealth manager Brewin Dolphin losing ground after it reported a 7.7% drop in total first-quarter funds amid falling markets and Sanne tumbling as it updated the market on its financial year and announced the retirement of its chief executive.

On the upside, Burberry reversed earlier losses as sales slightly disappointed over the festive quarter but the luxury fashion house maintained that it was successfully building "brand heat" ahead of next month's launch of its creative director's debut collection.

RPC Group rallied as it finally confirmed that it has received a take-private offer from US private equity group Apollo, valuing the plastics company at £3.3m.

It was outdone by Computacenter as the top riser on the FTSE 250 after it said trading had materially outperformed expectations for the past calendar year.

Two business operating on the high street and in airports, WH Smith advanced as it posted a 6% rise in sales for the 20 weeks to 19 January as a solid performance from its travel business offset lacklustre high street trading, while pub group Wetherspoon dipped as it said first-half pre-tax profit is expected to be lower than the previous year.

EasyJet got a boost as JPMorgan and Berenberg upped their price targets on the stock, taking British Airways owner IAG along for the ride, but Centrica was hit by a downgrade to 'neutral' from 'outperform' at Credit Suisse.

Market Movers

FTSE 100 (UKX) 6,842.88 -0.85%
FTSE 250 (MCX) 18,582.86 -0.53%
techMARK (TASX) 3,378.71 -0.26%

FTSE 100 - Risers

easyJet (EZJ) 1,280.00p 3.69%
Burberry Group (BRBY) 1,828.00p 2.93%
International Consolidated Airlines Group SA (CDI) (IAG) 631.40p 1.97%
Morrison (Wm) Supermarkets (MRW) 233.15p 1.77%
Evraz (EVR) 455.50p 1.76%
Tesco (TSCO) 223.60p 1.45%
SEGRO (SGRO) 634.00p 1.38%
Auto Trader Group (AUTO) 455.90p 1.22%
Ocado Group (OCDO) 925.80p 1.18%
Marks & Spencer Group (MKS) 289.30p 1.08%

FTSE 100 - Fallers

Smith (DS) (SMDS) 317.30p -5.42%
Reckitt Benckiser Group (RB.) 5,788.00p -4.00%
NMC Health (NMC) 2,700.00p -3.91%
Ferguson (FERG) 5,123.00p -3.41%
Melrose Industries (MRO) 164.05p -3.16%
Ashtead Group (AHT) 1,870.00p -3.01%
3i Group (III) 812.60p -2.94%
GVC Holdings (GVC) 669.50p -2.90%
St James's Place (STJ) 941.40p -2.75%
Fresnillo (FRES) 887.20p -2.74%

FTSE 250 - Risers

Computacenter (CCC) 1,126.00p 10.61%
IG Group Holdings (IGG) 615.00p 6.03%
Bank of Georgia Group (BGEO) 1,611.60p 5.18%
RPC Group (RPC) 766.00p 4.36%
Go-Ahead Group (GOG) 1,816.00p 4.01%
WH Smith (SMWH) 1,947.00p 3.78%
Acacia Mining (ACA) 184.00p 3.66%
TBC Bank Group (TBCG) 1,496.00p 3.31%
Coats Group (COA) 86.80p 2.97%
Hilton Food Group (HFG) 938.00p 2.85%

FTSE 250 - Fallers

Metro Bank (MTRO) 1,345.00p -38.92%
Sanne Group (SNN) 450.00p -17.73%
Premier Oil (PMO) 68.25p -5.41%
Sirius Minerals (SXX) 19.87p -4.47%
G4S (GFS) 198.45p -4.36%
Hunting (HTG) 526.00p -3.66%
Weir Group (WEIR) 1,387.50p -3.51%
Rank Group (RNK) 145.00p -3.33%
Renishaw (RSW) 4,064.00p -3.15%
Brewin Dolphin Holdings (BRW) 305.00p -3.05%