London close: Stocks slip amid heightened Mideast tensions

London stocks extended losses on Monday amid growing geopolitical tensions, while oil prices rallied and gold neared a seven-year high as investors flocked to safe havens.

The FTSE 100 was down 0.62% at 7,575.34, but did manage to claw back nearly half its early losses, with sterling boosted by a better-than-expected reading on the UK services sector and a weaker dollar.

The pound was up 0.71% against the US dollar at 1.31681 after a survey showed that the services sector stabilised in December, underpinned by the General Election. The IHS/Markit CIPS purchasing managers’ index ticked up to 50.0 from 49.3 in November, coming in ahead of a flash estimate of 49.0. A level above 50.0 signals expansion, while a reading below indicates contraction.

The stabilisation of service sector output was attributed to a return to improving order books, with the sharpest rise in new work since last July. Job creation also strengthened, partly driven by a rebound in business optimism to its highest for 15 months.

Thomas Pugh, UK economist at Capital Economics, said: "The decisive result of the General Election appears to have given the services PMI a bit of a boost. That may start to come through in other data in Q1, although Q4 was clearly very weak.

"Today’s release suggests that there could be a post-election bounce in the data over the next few months as confidence improves. If this is confirmed in January and February then it should be enough to convince the Bank to keep rates at 0.75%."

Overall, sentiment continued to be dented by geopolitical concerns as investors awaited Iran’s response to the US killing last week of a top Iranian general in Iraq.

Over the weekend, Iran announced that it would no longer abide by uranium enrichment limits under the 2015 nuclear deal. In addition, US President Donald Trump threatened Iraq with sanctions after the country’s parliament voted in favour of expelling American forces.

Trump said the US had identified 52 Iranian sites which would be attacked if Iran retaliates for the killing of General Qasem Soleimani. The targets represent 52 Americans who were held hostage in Iran from late 1979 after they were taken from the US embassy in Tehran.

Oil prices were West Texas Intermediate was up 0.17% at $63.16 a barrel and Brent crude was 0.45% higher at $68.91, having earlier topped $70 earlier for the first time in three months.

Meanwhile, gold prices hit their highest level since early 2013, rising to close to $1,591.

Oanda analyst Craig Erlam said: "The escalation in the middle east was both unexpected and unwelcome. Investors are now fully in defensive mode, hoping for the best but fearing the worst. Safe havens are naturally performing solidly while stocks and other risky assets take a pummelling.

"Unfortunately, the rhetoric from all sides appears to be heating up rather than cooling and retaliation looks almost inevitable. The Iraqi Parliament's decision to remove foreign troops clearly shows its disapproval for the actions of the US and others will likely be drawn into the dispute. Now is a time for calm heads and I'm afraid there doesn't appear to be many of those around."

In equity markets, NMC Health was the worst performer after the private healthcare operator said an independent review launched after research firm Muddy Waters shorted the stock last month will initially assess its cash balances as of 15 December.

Hikma Pharmaceuticals was also in the red, following a downgrade to ‘underweight’ at JPMorgan, while Pagegroup was hit by a downgrade to ‘hold’ at Jefferies.

Supermarket retailer Morrisons fell a day ahead of its Christmas trading update and after German discounter Aldi reported a slowdown in sales growth over the Christmas period.

Online trading platform Plus500 was in and out of the green all day after the company said it had seen an improvement in trading in the second half of the year, although earnings and revenue for 2019 were still expected to be lower on the year.

On the upside, oil giants BP and Royal Dutch Shell were among the top performers as oil prices rose, while Polymetal, Hochschild and Fresnillo benefited from the surge in gold prices.

Market Movers

FTSE 100 (UKX) 7,575.34 -0.62%
FTSE 250 (MCX) 21,760.53 -1.04%
techMARK (TASX) 4,185.92 -0.64%

FTSE 100 - Risers

BP (BP.) 504.10p 2.03%
BAE Systems (BA.) 588.60p 1.34%
Polymetal International (POLY) 1,221.50p 0.95%
Coca-Cola HBC AG (CDI) (CCH) 2,628.00p 0.88%
Associated British Foods (ABF) 2,615.00p 0.85%
Ashtead Group (AHT) 2,404.00p 0.80%
Royal Bank of Scotland Group (RBS) 240.00p 0.71%
JD Sports Fashion (JD.) 816.40p 0.64%
Ocado Group (OCDO) 1,271.50p 0.47%
Royal Dutch Shell 'A' (RDSA) 2,309.00p 0.46%

FTSE 100 - Fallers

NMC Health (NMC) 1,671.50p -4.49%
Hikma Pharmaceuticals (HIK) 1,912.00p -3.73%
Evraz (EVR) 387.00p -3.47%
Hargreaves Lansdown (HL.) 1,871.00p -3.38%
Morrison (Wm) Supermarkets (MRW) 192.45p -3.34%
Carnival (CCL) 3,481.00p -2.96%
International Consolidated Airlines Group SA (CDI) (IAG) 610.00p -2.46%
British Land Company (BLND) 615.00p -2.35%
Schroders (SDR) 3,259.00p -2.34%
Mondi (MNDI) 1,727.00p -2.26%

FTSE 250 - Risers

Wood Group (John) (WG.) 407.90p 3.76%
Babcock International Group (BAB) 628.40p 2.51%
International Public Partnerships Ltd. (INPP) 170.80p 2.15%
Ferrexpo (FXPO) 158.20p 1.61%
TalkTalk Telecom Group (TALK) 119.10p 1.28%
Senior (SNR) 186.20p 1.09%
Ultra Electronics Holdings (ULE) 2,162.00p 1.03%
Games Workshop Group (GAW) 6,225.00p 0.97%
Hunting (HTG) 416.80p 0.92%
Shaftesbury (SHB) 945.00p 0.91%

FTSE 250 - Fallers

Vistry Group (VTY) 1,209.00p -7.85%
Spirent Communications (SPT) 229.50p -6.71%
Hammerson (HMSO) 291.60p -5.54%
Trainline (TRN) 472.50p -4.55%
Pagegroup (PAGE) 499.60p -4.45%
Paragon Banking Group (PAG) 517.50p -4.43%
Network International Holdings (NETW) 605.00p -3.83%
Fisher (James) & Sons (FSJ) 1,974.00p -3.80%
Watches of Switzerland Group (WOSG) 375.40p -3.74%
Helios Towers (HTWS) 144.70p -3.53%