London close: Stocks fall as investors digest Trump's travel bans

London stocks were under pressure on Monday after US President Donald Trump announced a curb on refugees and a temporary travel ban on arrivals from several majority Muslim countries.

The FTSE 100 closed down 0.92% to 7,118.48 points.

The pound fell 0.39% against the dollar to $1.2506 and dropped 0.23% versus the euro to €1.1703.

On Friday, Trump put a 120-day hold on allowing refugees into the country, an indefinite ban on any refugees from Syria and a 90-day ban on citizens from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen. Downing Street reportedly insisted the new measures would not affect British citizens flying directly from the UK.

A petition in the UK gathered more than 1.3m signatures to stop a state visit for Trump, with protests planned in several cities across the country in response to his immigration ban. The British government said it won’t rescind its invitation to Trump to visit the UK later this year. However, the parliament will have to consider putting the issue up for debate since the petition has exceeded more than 100,000 on the legislative body’s website.

“It’s been a disappointing start to the week as we head towards the end of January, as investors digest the latest executive order from US President Donald Trump, which has prompted large scale sell-offs across the board for European stocks, as concerns rise that the US may become a much less predictable place to do business,” said Michael Hewson, chief market analyst at CMC Markets.

“For all the early optimism about the so called 'Trump trade' it would appear that for some the rose tinted glasses may well be starting to fall away as they digest this new entirely predictable turn of events.”

Market participants were also digesting mixed economic data.

The European Commission’s Eurozone economic sentiment index rose to 108.2 in January from 107.8 in December, beating expectations for an unchanged reading. The consumer confidence index in the bloc unexpectedly rose to -4.7 from -4.9.

The Commission also revealed UK consumer confidence fell to -5.1 in January from -4.6 in December, amid mounting concerns about rising inflation following the Brexit vote.

“Purchasing power looks set to be increasingly squeezed as inflation rises appreciably due to the weakened pound and earnings growth is pressurised by companies looking to limit pay to contain their total costs,” said Howard Archer, chief UK and European economist at IHS Global Insight.

“Indeed, it looks highly possible that inflation will move above earnings growth in 2017.”

German inflation rose an annualised 1.9% in January, compared to 1.7% in December and estimates for 2% growth.

In the US, personal spending increased 0.5% last month to $63.1bn, as expected, following a 0.2% gain in November, the Commerce Department said.

Personal income rose 0.3% to $50.2bn in December, compared to estimates for a 0.4% increase and following an upwardly revised 0.1% rise in November.

The core personal consumption expenditure deflator - which excludes food and energy and is the Federal Reserve’s preferred measure of inflation - was up 1.7% year-on-year in December, in line with analysts’ estimates and the previous month’s rate of growth.

On the month, core PCE climbed 0.1% in December, as predicted, picking up from November’s 0%.

“Nevertheless, with the Fed’s preferred core inflation measure still a little below the 2% target, we expect the Fed to take its time with the next interest rate hike,” said Paul Ashworth, chief US economist at Capital Economics.

“For the time being, the Fed is in wait-and-see mode until it gets some more clarity on the size, composition and timing of the fiscal stimulus. We suspect that it will be June before the Fed raises interest rates again.”

On the company front, DCC was a high riser as Goldman Sachs upgraded the stock to ‘buy’ from ‘neutral’ and lifted the price target to 7,400p from 7,000p, saying recent underperformance provides an attractive entry point.

Telecoms group Vodafone was in the black after confirming it is in talks over merging its Indian business with Idea Cellular, which is part of the Aditya Birla Group.

Supermarket Sainsbury was also up after Bank of America Merrill Lynch said it was the best candidate for M&A of all the UK grocers.

United Utilities was on the front foot as RBC Capital Markets lifted the stock to ‘sector perform’ from ‘underperform’. The bank said Brexit uncertainty and M&A interest could both be positive catalysts for the share price.

Engineer WS Atkins gained following a report in The Times that it has been approached by US company CH2M for a possible $4bn merger.

On the downside, supermarket Tesco lost ground. CMC Markets’ Michael Hewson said speculation is mounting of competition regulator intervention into the Booker acquisition.

Barclays was also weaker as Berenberg cut its stance on the stock to ‘sell’ from ‘hold’.

Aggreko shares were down after Deutsche Bank cut its rating even though the supplier of temporary power generation equipment is expected to see trading profit return to growth in 2018 after a 40% decline across 2012 to 2016.

Market Movers

FTSE 100 (UKX) 7,118.48 -0.92%
FTSE 250 (MCX) 18,081.82 -0.60%
techMARK (TASX) 3,232.17 -0.02%

FTSE 100 - Risers

DCC (DCC) 6,320.00p 2.10%
Paddy Power Betfair (PPB) 8,245.00p 1.73%
Vodafone Group (VOD) 195.95p 1.34%
Pearson (PSON) 615.00p 1.32%
Worldpay Group (WPG) 284.80p 0.99%
United Utilities Group (UU.) 908.00p 0.94%
Sainsbury (J) (SBRY) 256.90p 0.94%
Next (NXT) 3,886.00p 0.94%
Kingfisher (KGF) 335.50p 0.90%
BT Group (BT.A) 305.50p 0.89%

FTSE 100 - Fallers

Tesco (TSCO) 197.80p -4.24%
Rolls-Royce Holdings (RR.) 660.00p -3.79%
Old Mutual (OML) 205.40p -3.66%
Barclays (BARC) 223.40p -3.12%
Mediclinic International (MDC) 788.00p -2.78%
Royal Bank of Scotland Group (RBS) 225.50p -2.72%
Anglo American (AAL) 1,333.00p -2.63%
BHP Billiton (BLT) 1,413.50p -2.52%
International Consolidated Airlines Group SA (CDI) (IAG) 485.40p -2.51%
Ashtead Group (AHT) 1,601.00p -2.32%

FTSE 250 - Risers

Atkins (WS) (ATK) 1,484.00p 6.00%
Hill & Smith Holdings (HILS) 1,170.00p 3.08%
OneSavings Bank (OSB) 332.40p 2.28%
IP Group (IPO) 196.00p 1.71%
Restaurant Group (RTN) 291.90p 1.71%
Sophos Group (SOPH) 270.00p 1.66%
Synthomer (SYNT) 441.80p 1.61%
Dechra Pharmaceuticals (DPH) 1,466.00p 1.59%
Computacenter (CCC) 795.50p 1.53%
Dunelm Group (DNLM) 677.50p 1.50%

FTSE 250 - Fallers

Aggreko (AGK) 1,013.00p -4.34%
Evraz (EVR) 220.50p -4.26%
Cairn Energy (CNE) 229.00p -3.78%
Hunting (HTG) 554.00p -3.74%
Booker Group (BOK) 204.50p -3.67%
Amec Foster Wheeler (AMFW) 446.50p -3.61%
Vedanta Resources (VED) 1,013.00p -3.43%
Kaz Minerals (KAZ) 437.10p -3.30%
Brown (N.) Group (BWNG) 217.70p -3.29%
Aberdeen Asset Management (ADN) 262.40p -3.21%