London close: Stocks fall as Brexit fears drag on sentiment

UK equities closed lower on Monday as worries about the fallout of Brexit continue to weigh on sentiment.

S&P Global Ratings on Monday downgraded economic growth forecasts for the UK and the euro-area, citing the impact of Britain’s vote to leave the European Union.

The ratings agency said Brexit will cut UK gross domestic product by 1.2% next year and 1.0% percent in 2018, due to weaker investment prospects. S&P expects the EU referendum will knock 0.8% of eurozone GDP over 2017 and 2018.

To encourage continued investment in the UK, Chancellor George Osborne said he plans to cut corporation tax. He told the Financial Times he would cut the tax rate to below 15% from the current 20%, which would make it the lowest of any major economy.

The OECD, however, said that the UK is unlikely to entice business by becoming a tax haven after Brexit.

The pound rose 0.17% against the dollar to $1.3289 at 1621 BST.

Meanwhile, a survey showed that eurozone investor confidence has fallen to the lowest level since January after Brexit. Sentix’s forward-looking headline index for measuring investor confidence in the eurozone fell to +1.7 points in July from +9.9 in June, missing analysts’ estimates of +5.0.

Chief eurozone economist at Pantheon Macroeconomics, Claus Vistesen, said he believes the ECB's response to Brexit will be an extension of quantitative easing, which could "come as a disappointment to markets".

"This survey gives the first indication of the hit to sentiment from the Brexit fallout, and while further weakness next month is possible, the initial fall is smaller than we feared."

A separate report showed the pace of UK construction slowed more than expected in June. The Markit/CIPS UK construction purchasing managers’ index fell to 46.0 from 51.2 in May, marking its lowest level in seven years and below the 50.0 threshold that separates contraction from expansion for the first time since April 2013. Economists had been expecting a reading of 50.5.

In commodities, oil prices reversed earlier gains as signs of slowing demand in Asia offset remarks by energy minister of Saudi Arabia Khaled Al-Faleh that global oil markets were heading towards balance.

Brent crude fell 0.47% to $50.11 per barrel and West Texas Intermediate dropped 0.36% to $48.81 per barrel at 1626 BST.

On the corporate front, mining stocks rallied as gold prices rose 1.05% and silver prices jumped 4.15% on the Comex.

Silver producer Fresnillo was the biggest riser. The company was also boosted by confirmation that construction of the San Julián project, phase 1, completed on time and on budget.

UK real estate investment trusts were the biggest fallers after Liberum downgraded its ratings on several big names. The brokerage cut British Land, Land Securities and Intu Properties to ‘sell’ from ‘hold’, and Hammerson to ‘hold’ from ‘buy.’

Housebuilders, including Persimmon and Taylor Wimpey, also slumped after the weaker UK construction PMI report from Markit/CIPS.

Marks & Spencer was under the cosh as Deutsche Bank downgraded it to ‘hold’ from ‘buy’.

Moneysupermarket edged down after Barclays downgraded its recommendation on shares following the "jolt" of the UK referendum from 'overweight' to 'equalweight' and cut the target price from 390p to 260p.

Rightmove was another faller as Barclays lowered its recommendation on shares from 'overweight' to 'underweight' and reduced its target price from 4,550p to 4,300p.

Clarkson declined after saying full year profits will be "materially lower" in 2016 as a result of lower freight rates, quiet capital markets and weak investor confidence.

Market Movers

FTSE 100 (UKX) 6,522.26 -0.84%
FTSE 250 (MCX) 16,132.26 -2.02%
techMARK (TASX) 3,206.79 -0.86%

FTSE 100 - Risers

Fresnillo (FRES) 1,895.00p 7.67%
Glencore (GLEN) 163.10p 4.58%
Randgold Resources Ltd. (RRS) 9,160.00p 4.39%
Antofagasta (ANTO) 480.60p 2.34%
BHP Billiton (BLT) 951.70p 1.24%
SSE (SSE) 1,586.00p 1.02%
Shire Plc (SHP) 4,711.00p 0.83%
Anglo American (AAL) 764.00p 0.79%
Severn Trent (SVT) 2,448.00p 0.78%
British American Tobacco (BATS) 4,917.00p 0.78%

FTSE 100 - Fallers

British Land Company (BLND) 565.00p -7.15%
Persimmon (PSN) 1,435.00p -6.82%
Berkeley Group Holdings (The) (BKG) 2,485.00p -6.37%
Taylor Wimpey (TW.) 130.50p -6.32%
Barratt Developments (BDEV) 389.90p -6.05%
Land Securities Group (LAND) 980.00p -5.68%
Marks & Spencer Group (MKS) 303.90p -5.06%
Standard Life (SL.) 286.50p -4.50%
Hargreaves Lansdown (HL.) 1,192.00p -4.49%
Hammerson (HMSO) 509.00p -4.41%

FTSE 250 - Risers

Acacia Mining (ACA) 482.90p 4.10%
AO World (AO.) 147.20p 3.30%
Hochschild Mining (HOC) 202.90p 3.26%
Centamin (DI) (CEY) 146.20p 3.18%
Vedanta Resources (VED) 444.10p 2.63%
Indivior (INDV) 255.70p 2.20%
Daejan Holdings (DJAN) 4,953.00p 2.10%
Bodycote (BOY) 540.00p 2.08%
Polymetal International (POLY) 1,081.00p 2.08%
Vesuvius (VSVS) 295.10p 1.06%

FTSE 250 - Fallers

Clarkson (CKN) 1,850.00p -16.10%
Moneysupermarket.com Group (MONY) 243.70p -11.38%
Shawbrook Group (SHAW) 160.00p -7.83%
Crest Nicholson Holdings (CRST) 364.10p -7.82%
Bovis Homes Group (BVS) 708.50p -7.08%
Rightmove (RMV) 3,500.00p -6.37%
Bellway (BWY) 1,852.00p -6.09%
Kier Group (KIE) 987.00p -6.00%
Close Brothers Group (CBG) 1,070.00p -5.89%
Redrow (RDW) 313.50p -5.71%