London close: Shares decline as investors play it safe ahead of Brexit bill vote

London stocks fell on Monday as investors grew jittery ahead of this week's Brexit vote in the House of Commons and before a raft of other key risk events around the globe, including the second round of US-China trade talks which were scheduled for Wednesday and Thursday.

The FTSE 100 shed 0.91% to 6,747.10, while the pound was down 0.42% against the US dollar at 1.31568 and 0.51% lower versus the euro at 1.1511.

David Cheetham, chief market analyst at XTB, said the dip in the pound "seems to be more a case of the market paring its recent gains after a strong run higher of late rather than a clear reversal as once more traders are keenly awaiting a parliamentary vote on the PM’s latest deal".

Over the weekend, Ireland’s deputy Prime Minister Simon Coveney told BBC’s Andrew Marr that the backstop element of the withdrawal agreement is was "not going to change" and that the EU would not ratify a deal without it. Furthermore, on Monday an EU spokesperson reiterated that the Withdrawal Agreement is not up for renegotiation.

As for market watchers, while the deal last Friday to temporarily end the US government shutdown had removed one area of worry for a few weeks, IG's chief market analyst, Chris Beauchamp, said for now traders are cautious ahead of US-China trade talks.

"Then there is the Fed, oh and the Brexit vote tomorrow night, and that is without mentioning all the earnings due in the next few days. Such a busy week will be a key test of the resilience of the risk appetite seen over the past month. Has this been one of the shortest bear markets in history, or merely a pause before a new one gets underway?"

Other strategists were in a somewhat similar frame of mind.

On the more positive side of things, on Friday, JP Morgan's head of cross-asset fundamental strategy, John Normand, told clients: "while we share almost every reservation about limited upside when the Fed pauses late-cycle, we still think that stable policy for another several months isn't fully in the price of markets outside of Treasuries."

Strategists at Bank of America-Merrill Lynch on the other hand were more cautious. In a research note entitled "take cover", they told clients that a US-China deal and a 'dovish' Fed were already "consensus" or priced into stocks, with only improved economic data out of China left to drive further upside, but that, they said, was a story for the second quarter.

In the meantime, they believed that "markets may correct."

On the corporate front, Tesco was weaker following reports over the weekend that it could cut 15,000 jobs and close some of its fresh food and bakery counters.

Wood Group slipped even as it said it has reaped $54m in cash proceeds from selling off stakes in non-core joint ventures in the last couple of months.

On the upside, Ocado gained on a report over the weekend that it has held secret talks with Marks & Spencer over the launch of a food delivery service that could mark the end of its tie-up with Waitrose. M&S shares were also up.

Russ Mould, investment director at AJ Bell, said: "Reports suggest Marks & Spencer is interested in buying some of Ocado’s distribution centres and delivery vehicles. In essence it would buy the part of the group currently powering Waitrose’s deliveries.

"Such a move would be another tick in the box for Ocado which is adding relationships with supermarkets in several parts of the world. Its core focus is now selling technology expertise to the food retail sector rather than running physical delivery operations.

"For Marks & Spencer, having a stronger delivery network would give it a new way in which to try and boost earnings. There is no guarantee this would be the magic solution to fix its declining profits but it would put the business on a more level pegging with some of its key competitors."

Paragon Banking gained as the specialist lender posted a 40.6% jump in first-quarter total new lending and backed its full-year guidance, while automotive fluid technology specialist TI Fluid Systems advanced after saying it expects group results for the past calendar year to be in line with its expectations.

The heavyweight miners were mixed as iron ore prices were higher after the Vale dam collapse in Brazil, but other basic metals underperformed after the US Treasury lifted sanctions on Rusal, the world’s largest aluminium producer outside of China.

In broker note action, Dixons Carphone rallied after an upgrade to ‘overweight’ at Morgan Stanley, while Halfords and Next were both upgraded to ‘equalweight’.

Vodafone was lifted to ‘buy’ at Kepler Cheuvreux and National Express was bumped up to ‘buy’ at Liberum.

Micro Focus was knocked lower by a downgrade to ‘neutral’ at Goldman Sachs, while Gym Group was started at ‘neutral’ by Citi and On The Beach was initiated at ‘buy’ over at Jefferies.

Market Movers

FTSE 100 (UKX) 6,747.10 -0.91%
FTSE 250 (MCX) 18,534.68 -0.58%
techMARK (TASX) 3,308.11 -0.58%

FTSE 100 - Risers

Ocado Group (OCDO) 966.00p 2.07%
Rio Tinto (RIO) 3,944.50p 1.71%
Carnival (CCL) 4,166.00p 1.49%
Land Securities Group (LAND) 863.20p 1.12%
InterContinental Hotels Group (IHG) 4,306.50p 1.06%
Spirax-Sarco Engineering (SPX) 6,305.00p 1.04%
Paddy Power Betfair (PPB) 6,070.00p 1.00%
Coca-Cola HBC AG (CDI) (CCH) 2,508.00p 0.76%
Ashtead Group (AHT) 1,937.00p 0.62%
BHP Group (BHP) 1,619.20p 0.61%

FTSE 100 - Fallers

NMC Health (NMC) 2,560.00p -3.98%
ITV (ITV) 128.30p -2.77%
Lloyds Banking Group (LLOY) 57.00p -2.68%
Barclays (BARC) 160.08p -2.45%
Imperial Brands (IMB) 2,354.50p -2.42%
GVC Holdings (GVC) 637.00p -2.38%
BP (BP.) 494.90p -2.37%
Micro Focus International (MCRO) 1,459.50p -2.24%
Wood Group (John) (WG.) 522.40p -2.21%
Glencore (GLEN) 291.35p -2.03%

FTSE 250 - Risers

TI Fluid Systems (TIFS) 169.70p 5.40%
Ferrexpo (FXPO) 209.20p 4.34%
Restaurant Group (RTN) 148.00p 2.78%
Spirent Communications (SPT) 146.80p 2.66%
Derwent London (DLN) 3,151.00p 2.51%
Capital & Counties Properties (CAPC) 244.70p 2.00%
Great Portland Estates (GPOR) 739.00p 1.71%
Primary Health Properties (PHP) 114.60p 1.60%
Dixons Carphone (DC.) 144.35p 1.51%
Ashmore Group (ASHM) 399.40p 1.42%

FTSE 250 - Fallers

CYBG (CYBG) 185.00p -5.27%
IG Group Holdings (IGG) 612.00p -5.04%
Premier Oil (PMO) 67.60p -4.39%
Tullow Oil (TLW) 188.50p -4.29%
Mediclinic International (MDC) 306.20p -4.19%
Capita (CPI) 112.45p -3.60%
Ibstock (IBST) 234.40p -3.54%
IWG (IWG) 220.20p -3.04%
Inchcape (INCH) 563.00p -3.01%
Moneysupermarket.com Group (MONY) 295.60p -2.89%