London close: Brexit worries weigh on UK equities

London stocks finished in negative territory on Tuesday on Brexit fears and a worse-than-expected UK inflation report.

Recent polls showing support for leaving the EU ahead of the 23 June referendum have weighed on the market this week.

An online poll by TNS on Tuesday showed 47% of respondents said they will opt to leave the EU, compared to 40% who want to stay.

The latest YouGov poll, published in The Times on Tuesday, revealed support for Brexit jumped by three percentage points to 46% over the latest week, while backing for ‘Remain’ lost three percentage points to 39%.

The pound dropped 1.18% to $1.4102 at 1624 BST.

Oil prices were also lower as investors remained risk-averse ahead of the EU referendum. Brent crude fell 1.5% to $49.56 per barrel and West Texas Intermediate decreased 1.3% to $48.22 per barrel at 1626 BST.

Meanwhile, UK inflation remained depressed in May, with the consumer price index (CPI) flat at 0.3% on an annual basis, short of expectations for a 0.4% increase, data from the Office for National Statistics showed.

The month-on-month rate of CPI only rose to 0.2% when it had been expected to rise to 0.3% from 0.1% in April.

CPI inflation looks set to remain fairly subdued for most of the second half of this year, said Paul Hollingsworth at Capital Economics, with some clear risks on the horizon.

"If the UK votes to leave the EU next week, we expect sterling to fall sharply, which would put significant upward pressure on inflation further ahead. On the other hand, if the UK votes to remain, then sterling could recover a bit.

"But the economy would probably get a post-referendum rebound too. So whatever happens, we expect inflation to regain some momentum over the coming quarters, and should be closer to 1% around the turn of the year."

In the US, retail sales rose 0.5% from the previous month versus expectations of a 0.3% gain, the Commerce Department said.

A measure of small-business sentiment in the US rose in May, according to the National Federation of Independent Business. The optimism index climbed 0.2 point to 93.8, beating forecasts of 93.5.

US business inventories rose 0.1% in April after a downwardly revised 0.3% in March, missing estimates for a 0.2% increase.

Among corporate stocks, housebuilders were the biggest fallers on the FTSE 350 amid Brexit worries. Berkeley Group, Taylor Wimpey, Crest Nicholson and Barratt Developments were in the red.

Ashtead rallied after announcing a bumper dividend and a £200m share buyback following a strong fourth quarter where profit margins grew to record levels.

Educational publisher Pearson was recovering from an afternoon in decline yesterday, after it received a ‘sell’ rating from analysts at Deutsche Bank.

Go-Ahead plunged after saying in a trading update it expects margins over the life of the Govia Thames Railway franchise to be lower than previously anticipated during periods of operational challenges and industrial disputes. Investec downgraded its stance on the transport operator to ‘add’ from ‘buy’ and cut the price target to 2,500p from 2,800p following the trading update.

FirstGroup jumped after reporting a rise in full-year profit despite a drop in revenue following the loss of rail franchises.

Ted Baker gained after reporting a 12.7% increase in first quarter retail sales and saying it expects full year results to meet expectations.

Market Movers

FTSE 100 (UKX) 5,923.20 -2.01%
FTSE 250 (MCX) 16,241.47 -2.01%
techMARK (TASX) 2,975.27 -1.08%

FTSE 100 - Risers

Ashtead Group (AHT) 985.50p 2.98%
ARM Holdings (ARM) 959.00p -0.10%
BAE Systems (BA.) 475.60p -0.15%
Rolls-Royce Holdings (RR.) 597.50p -0.50%
Carnival (CCL) 3,322.00p -0.54%
SABMiller (SAB) 4,260.00p -0.56%
Rexam (REX) 629.50p -0.63%
CRH (CRH) 1,999.00p -0.70%
Vodafone Group (VOD) 209.55p -0.73%
Pearson (PSON) 788.00p -0.82%

FTSE 100 - Fallers

Anglo American (AAL) 598.30p -5.84%
Antofagasta (ANTO) 394.50p -5.30%
Sky (SKY) 852.00p -4.43%
Berkeley Group Holdings (The) (BKG) 2,990.00p -4.17%
BHP Billiton (BLT) 789.70p -4.09%
Morrison (Wm) Supermarkets (MRW) 173.70p -3.98%
Taylor Wimpey (TW.) 173.00p -3.73%
Barratt Developments (BDEV) 516.50p -3.73%
Glencore (GLEN) 128.15p -3.57%
St James's Place (STJ) 811.00p -3.51%

FTSE 250 - Risers

Ted Baker (TED) 2,524.00p 8.56%
FirstGroup (FGP) 109.30p 6.01%
Allied Minds (ALM) 339.60p 4.11%
Indivior (INDV) 214.50p 2.14%
Euromoney Institutional Investor (ERM) 950.00p 1.06%
P2P Global Investments (P2P) 854.00p 1.01%
PayPoint (PAY) 950.00p 0.96%
Fidelity China Special Situations (FCSS) 136.40p 0.89%
Assura (AGR) 56.15p 0.36%
Riverstone Energy Limited (RSE) 850.00p 0.35%

FTSE 250 - Fallers

Go-Ahead Group (GOG) 1,998.00p -17.88%
Telecom Plus (TEP) 950.00p -6.86%
Crest Nicholson Holdings (CRST) 522.00p -6.79%
Essentra (ESNT) 521.50p -6.21%
Restaurant Group (RTN) 335.00p -6.06%
Electrocomponents (ECM) 261.00p -5.88%
Stagecoach Group (SGC) 234.50p -5.52%
Interserve (IRV) 292.00p -5.44%
Paragon Group Of Companies (PAG) 275.50p -5.36%
Rightmove (RMV) 3,899.00p -5.16%