London close: Stocks slip on trade worries

London stocks had pared gains by midday on Tuesday as their European counterparts retreated, but miners were strong and Galliford Try gained ground after rejecting a bid from Bovis Homes.

The FTSE 100 dipped 0.12% to 7,268.95, giving up earlier small gains as the main European indices fell amid concerns about Italy's budget deficit.

Over on the second-tier index it was a different story, with the FTSE 250 adding 0.41% to 19,204.93.

Stocks on the top-flight index had kicked off in the green, with sentiment underpinned by hopes of a trade deal between the US and Japan.

Nonetheless, in remarks made during his visit to Tokyo, Trump also said that American tariffs on Chinese goods "could go up very, very substantially, very easily."

And on Tuesday, a senior official at China's state planner quoted by Xinhua said that Beijing would prioritise domestic demand for so-called 'rare earths', a key element in many high-technology and defence applications, in what appeared to be a clear move to ramp up the pressure on Washington.

Worries about Italy's debt also weighed on sentiment, with Italian government bond yields rising amid fears of a political fight between Rome and Brussels.

CMC Markets UK's analyst David Madden said: "The EU has warned the Italian government they could be fined up to €4nn for failing to curb their debt levels, and Italy’s joint deputy prime minister, Matteo Salvini, declared he will use ‘all his energies’ to fight the EU’s rules.

"Mr Salvini is feeling emboldened by his party’s success at the weekend, and he is determined to run a budget deficit in order to try and keep the Italian economy out of recession."

In currency markets, sterling was down 0.11% against the dollar at 1.2667 but up by 0.11% versus the euro at 1.1341, trading near the four-month lows struck at the end of last week.

Spreadex analyst Connor Campbell said: "The pound seems desperate to wrap up an utterly exhausting May in the quietest way it can, despite the political whirlwind either side of the weekend - a whirlwind that is going to stretch well into June as the Tories try and pick a new leader."

Investors were also digesting the latest data from UK Finance, which showed mortgage approvals rose to their highest level in April since February 2017.

Mortgage approvals increased to 42,989 from 40,564 in March, coming in well above consensus expectations for 39,500.

Meanwhile, consumer lending pushed up 3.8% on the year in April, slowing down a touch from March's 4.1% growth.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the mortgage approvals figures provide more evidence that households have not been fazed by the fraught political situation.

"Granted, the UK Finance measure only relates to loans by seven high street banking groups accounting for two-thirds of the overall market. The official measure of approvals fell to a 15-month low in March, despite a marginal rise in the UK Finance measure. In addition, the new buyer enquiries balance of the RICS Residential Market Survey still points to rapidly falling demand.

"Nonetheless, we doubt that the main banks are gaining market share so rapidly that the UK Finance data are completely misleading about overall market trends, while the RICS survey has cried wolf for several months now."

In equity markets, miners were the standout gainers as iron ore prices rose, with Rio Tinto, Antofagasta and BHP all trading up.

In individual company news, NMC Health was the top performer after it upgraded its underlying guidance for this year to reflect the impact of a healthcare joint venture in Saudi Arabia.

Housebuilder Galliford Try rose after saying it had rejected a bid from rival Bovis Homes as the offer was not in the interests of all shareholders. Bovis wanted to buy Galliford’s Linden Homes and Partnerships & Regeneration arm in exchange for new Bovis shares.

Shares in FTSE 250 lender Amigo Holdings meanwhile shot higher as it posted a 38.3% jump in full-year adjusted profit after tax to £100.1m as customer numbers grew 23.1% to 224,000.

Aviva advanced following a Financial Times report that the company is preparing to outline a big shake-up of its UK business next week, which could involve splitting itself into two divisions: life insurance and non-life insurance.

Marks & Spencer was among the risers, having dropped sharply last week on the back of news of a discounted rights issue and a dividend cut.

David Cheetham, chief market analyst at XTB, said that despite the strong share price performance on Tuesday, a look back at prior performance makes for "pretty grim viewing", with a six-month decline in the stock price of almost 20% and a near-40% drop seen in the past couple of years.

He said "a litany of mistakes" was to blame for this poor performance and while a demotion from the FTSE 100 in the upcoming quarterly reshuffle wouldn’t materially impact business operations, "it would likely do more damage to its weary investors and their holdings".

Doorstep lender Provident Financial reversed early losses even after it published a letter from one of its shareholders - M&G Investments - saying it will not back the takeover offer from smaller rival Non-Standard Finance.

Market Movers

FTSE 100 (UKX) 7,268.95 -0.12%
FTSE 250 (MCX) 19,204.93 0.41%
techMARK (TASX) 3,516.18 -0.37%

FTSE 100 - Risers

NMC Health (NMC) 2,620.00p 7.47%
Flutter Entertainment (FLTR) 5,874.00p 3.49%
Rio Tinto (RIO) 4,776.00p 2.89%
Tesco (TSCO) 238.20p 2.67%
Melrose Industries (MRO) 173.10p 2.34%
Severn Trent (SVT) 1,953.00p 2.33%
Kingfisher (KGF) 218.40p 2.30%
Intertek Group (ITRK) 5,360.00p 2.25%
United Utilities Group (UU.) 795.60p 2.21%
Admiral Group (ADM) 2,093.00p 2.15%

FTSE 100 - Fallers

British American Tobacco (BATS) 2,892.00p -3.28%
Evraz (EVR) 587.60p -3.13%
Spirax-Sarco Engineering (SPX) 8,650.00p -2.48%
AstraZeneca (AZN) 5,938.00p -2.48%
Imperial Brands (IMB) 1,999.80p -2.40%
GlaxoSmithKline (GSK) 1,546.80p -2.23%
Schroders (SDR) 2,877.00p -2.14%
SEGRO (SGRO) 691.00p -1.76%
Rolls-Royce Holdings (RR.) 874.20p -1.58%
Smurfit Kappa Group (SKG) 2,221.00p -1.55%

FTSE 250 - Risers

Stobart Group Ltd. (STOB) 117.40p 9.72%
Amigo Holdings (AMGO) 241.00p 8.84%
Sirius Minerals (SXX) 16.20p 6.93%
Bakkavor Group (BAKK) 130.60p 6.18%
Metro Bank (MTRO) 785.50p 5.05%
Aston Martin Lagonda Global Holdings (AML) 885.30p 4.93%
Provident Financial (PFG) 472.60p 4.37%
B&M European Value Retail S.A. (DI) (BME) 362.00p 4.17%
Sophos Group (SOPH) 420.50p 3.84%
Convatec Group (CTEC) 146.95p 3.81%

FTSE 250 - Fallers

Saga (SAGA) 45.22p -8.65%
Cobham (COB) 104.30p -5.14%
Kier Group (KIE) 268.80p -4.55%
Intu Properties (INTU) 89.74p -4.53%
Rank Group (RNK) 148.20p -4.51%
Capital & Counties Properties (CAPC) 213.80p -3.35%
Hilton Food Group (HFG) 1,006.00p -3.27%
Contour Global (GLO) 188.00p -3.09%
Investec (INVP) 457.40p -2.78%
Quilter (QLT) 131.66p -2.63%