London close: Sainsbury weighs on grocers, China on miners

Weak full-year results from Sainsbury and worries about the outlook for growth in China weighed on London's top flight index as investors mulled reports that the European Union wanted to play hardball with Westminster, asking for up to €100bn in payments from the UK as the price of its Brexit divorce settlement.

The FTSE 100 erased 0.21% to close at 7,234.53, while the second-tier FTSE 250 lost 0.62% to finish at 19,683.39.

Although the net bill to Britain would be lower than €100bn once the UK's rebate was taken into consideration, the gross amount mooted would be much more than the €60bn originally proposed by European Commission president Jean-Claude Juncker back in February, according to the Financial Times.

"First Juncker, and now Barnier; it is clear that the powers that be in the EU are setting the groundwork for two years of confrontational and tense negotiations," said Josh Mahony, market analyst at IG.

"To an extent, the outperformance of the pound amid such pessimistic tones out of the EU points towards a market that has factored in a hard Brexit."

Acting as a backdrop, the US central bank was expected to publish its policy statement at 2015 BST. Analysts did not expect any policy changes, but were divided about if the Federal Reserve would signal a further small shift towards a tightening bias.

To take note of, despite the seeming calm in financial markets various analysts highlighted the unusually low levels of volatility, which are sometimes a harbinger of rougher seas ahead.

"A wait-and-see approach took hold in stock markets on Wednesday where modest losses unwound some of yesterday’s gains. Stock market volatility remains close to the lowest ever and it’s hard to imagine the Federal Reserve meeting later today will change that. Data from BOAML indicates S&P500 100-day volatility has only been lower 3% of the time since 1928," Jasper Lawler, senior market analyst at LCG commented to clients.

Weighing on miners were concerns about the outlook for the Chinese economy and the latest LME inventory copper figures, which traders say added to the selling pressure on base metals, forcing the 'weaker longs' to exit their positions.

The French elections were also on investors' minds as presidential front-runner Emmanuel Macron got set to go head to head with Marine Le Pen in a televised debate on Wednesday evening before Sunday's runoff vote.

"This debate is a key milestone ahead of the vote between the two non-establishment parties. Given the vote takes place during a bank holiday weekend, there is a risk we could see higher-than-usual rates of abstention/nil votes, so both candidates will be especially keen to gain momentum," Francois Cabau and Philippe Gudin at Barclays Research wrote to clients.

"Together with the final results, it could also have crucial ramifications for the legislative election rounds, which remain highly uncertain according to estimates."

Grocers, miners move lower

In corporate news, supermarket chain Sainsbury’s was under the cosh after it said full-year profit dropped 8.2%.

Sticking with supermarkets, data from Kanta Worldpanel revealed that shoppers spent £325m on Easter eggs over the last three months, helping the sector grow at its fastest rate for three and a half years, led by Morrisons.

Sales increased at all major grocers but the 'big four' grocers all lost market share as discounters continued their land grab.

Miners were also unwanted as iron ore and base metals' prices gave back ground. At the closing bell in London, July 2017 copper futures on COMEX were losing 3.49% to $2.5435/oz. amid recent 'market chatter' that Beijing's crackdown on so-called 'shadow financing' will weigh on speculative positions in commodity markets and real estate investment in the Asian giant.

Elsewhere, stock in broadcaster ITV slipped as chief executive Adam Crozier stepped down from his role after seven years, with no direct replacement appointed yet.

Paddy Power Betfair fell back despite posting an 87% rise in first-quarter earnings as revenues were boosted by the weaker pound and favourable results at Cheltenham, while Galliford Try slumped as it took a £98m hit for legacy contract costs.

Halfords Group retreated as it lost another chief executive to a larger retailer, with Jill McDonald poached by Marks & Spencer to be managing director of its non-food business.

Gold miner Centamin lost its shine as it said first-quarter pre-tax profit fell 28%.

Utility infrastructure company Pennon was under pressure after the Greater Manchester Waste Disposal Authority confirmed that it was looking to exit its recycling and waste management contract with Viridor Laing.

Imagination Technologies, whose chips are used by Apple, was in the red after the US technology giant said late on Tuesday that it sold fewer iPhones in the second quarter compared to a year ago.

Imperial Brands reversed earlier gains as it rolled another fat dividend for the first half of the year as earnings came out ahead of expectations despite continued tobacco volumes declines and a major increase in investment .

Burberry nudged lower after RBC Capital Markets cut the stock to 'underperform', while Aggreko and Spirax Sarco were hit by downgrades at Morgan Stanley and UBS, respectively.

Going the other way, Direct Line pushed higher as it said business continued to motor ahead during the first quarter of the year, driven by strong demand for its own brand motor insurance, with the company reiterating its guidance for key metrics in fiscal year 2017.

Software company Sage Group was on the front foot as it reported a rise in first-half profit as subscriptions grew and it said it expects to exceed its full-year revenue guidance.

Outsourcer Mitie surged after saying it will write down its balance sheet by £40m to £50m following an accounting review.

Pub operator JD Wetherspoon was trading higher as it said third-quarter like-for-like sales rose 4%, up from 3.8% growth the same time a year ago.

InterContinental Hotels was lifted by an initiation at 'outperform' by Bernstein.

Market Movers

FTSE 100 (UKX) 7,229.52 -0.28%
FTSE 250 (MCX) 19,673.54 -0.67%
techMARK (TASX) 3,523.37 -0.03%

FTSE 100 - Risers

Sage Group (SGE) 704.00p 3.00%
Johnson Matthey (JMAT) 3,094.00p 2.86%
Pearson (PSON) 656.50p 1.70%
Micro Focus International (MCRO) 2,656.00p 1.68%
Next (NXT) 4,426.00p 1.47%
InterContinental Hotels Group (IHG) 4,164.00p 1.24%
Shire Plc (SHP) 4,707.00p 1.20%
Smurfit Kappa Group (SKG) 2,113.00p 1.20%
Admiral Group (ADM) 2,074.00p 1.17%
United Utilities Group (UU.) 994.00p 1.12%

FTSE 100 - Fallers

Sainsbury (J) (SBRY) 264.20p -5.47%
Paddy Power Betfair (PPB) 8,430.00p -3.93%
Glencore (GLEN) 286.90p -3.68%
Tesco (TSCO) 176.55p -3.52%
Anglo American (AAL) 1,046.00p -3.06%
Convatec Group (CTEC) 298.60p -2.89%
Rio Tinto (RIO) 2,963.50p -2.71%
Ashtead Group (AHT) 1,561.00p -2.56%
Antofagasta (ANTO) 788.00p -2.54%
Hikma Pharmaceuticals (HIK) 1,940.00p -2.17%

FTSE 250 - Risers

Mitie Group (MTO) 231.20p 9.37%
Cairn Energy (CNE) 195.20p 3.66%
PayPoint (PAY) 1,043.00p 2.86%
AO World (AO.) 142.60p 2.66%
Wetherspoon (J.D.) (JDW) 1,034.00p 2.38%
The Renewables Infrastructure Group Limited (TRIG) 111.30p 1.64%
Inmarsat (ISAT) 838.00p 1.51%
Ashmore Group (ASHM) 355.80p 1.43%
IWG (IWG) 334.70p 1.24%
Entertainment One Limited (ETO) 249.00p 1.22%

FTSE 250 - Fallers

Galliford Try (GFRD) 1,311.00p -10.33%
Centamin (DI) (CEY) 163.20p -5.94%
Carillion (CLLN) 217.00p -4.74%
Aggreko (AGK) 838.00p -4.39%
Indivior (INDV) 324.10p -3.94%
Thomas Cook Group (TCG) 91.10p -3.90%
Rotork (ROR) 240.00p -3.65%
Kaz Minerals (KAZ) 488.00p -3.08%
Pennon Group (PNN) 840.00p -2.89%
Booker Group (BOK) 190.20p -2.81%