London midday: FTSE falters as pound receives Brexit boost
The FTSE 100 declined on Friday as the pound surged against the dollar on reports some MPs are prepared to vote against triggering the formal Brexit process.
London’s top tier index fell 1.06% to 6,755.84 points, while the pound rose 0.67% versus the dollar at $1.2639.
Sterling received a boost after Liberal Democrat, Labour and SDLP MPs told the BBC they are willing to vote against invoking Article 50 in Parliament. Lib Dem leader Tim Farron said his party would oppose Brexit unless promised a second referendum on the UK's deal with the European Union.
“Sterling remains cursed by the Brexit woes in the longer term with the current technical bounce providing a foundation for sellers to pounce in the coming weeks,” said FXTM research analyst Lukman Otunuga.
“From a technical standpoint, bulls may ferry the GBPUSD towards the 1.2800 resistance which could mark the end of the technical bounce.”
Donald Trump’s election win this week has also provided a boost to sterling against the greenback. Ahead of his victory he had said the US would reach a trade deal before the rest of Europe.
Meanwhile, S&P Global said it predicts a so-called “hard Brexit”, in which Britain loses its access to the single market, is the most likely outcome of negotiations. S&P’s chief sovereign credit officer Mortiz Kraemer said it is hard see how a hard Brexit can be avoided unless both sides become more flexible.
“Nothing today suggests that a common quest for compromise will overcome the gulf that now looks as wide as the English Channel," Kraemer said.
In economic data, UK construction output hit its lowest level in four years in July to September. The Office for National Statistics said construction volumes fell by 1.1% in the third quarter compared to the April to June period, marking the weakest performance since the third quarter of 2012. Still, this was less steep than the 1.4% drop expected.
Data from Destatis confirmed German inflation was at a two-year high in October. Consumer prices last month rose 0.2% from September and 0.8% from October last year, which is its highest level since October 2014. Meanwhile, the annual rate of inflation came in at 0.7%. This was in line with consensus and the original estimate.
In the European Union, consumer prices were up 0.2% on the month and 0.7% compared to October 2015.
On the commodities front, oil prices dropped on persistent worries about a global supply glut. Brent crude futures fell 1.3% to $45.24 per barrel and West Texas Intermediate shed 1.5% to $44.00 per barrel at 1157 GMT.
In corporate news, Shell slipped back following a report that it plans to continue investing heavily in Brazil over the next five years, with the aim of doubling its deep-water production by the early 2020s.
Hikma Pharmaceuticals slumped a day after nudging down its full-year revenue guidance, saying it now expects it to rise by around 35% to $2bn at constant currency, down from a previous range of $2bn to $2.1bn.
SIG plummeted as the building products distributor issued a profit warning and announced that its chief executive has stepped down, as its like-for-like, third quarter sales fell. Jefferies downgraded SIG to ‘hold’ from ‘buy’ and slashed the price target to 90p from 140p following the profit warning.
Tullow Oil’s shares were under the cosh as Canaccord Genuity downgraded its rating to ‘sell’ from ‘hold’ but raised its target price to 230p from 220p.
Dairy Crest edged lower after JPMorgan Cazenove downgraded the stock to ‘neutral’ from ‘overweight’ as it surpassed its 600p price target.
Going the other way, Ryanair, EasyJet and International Consolidated Airlines Group rallied after Berenberg initiated coverage of the stocks with a ‘buy’ rating.
Market Movers
FTSE 100 (UKX) 6,755.84 -1.06%
FTSE 250 (MCX) 17,503.12 -0.89%
techMARK (TASX) 3,318.25 -1.02%
FTSE 100 - Risers
Next (NXT) 5,060.00p 3.46%
Sainsbury (J) (SBRY) 238.10p 3.30%
BT Group (BT.A) 358.80p 3.15%
Marks & Spencer Group (MKS) 325.50p 2.75%
Dixons Carphone (DC.) 330.50p 2.67%
British American Tobacco (BATS) 4,351.00p 2.17%
Taylor Wimpey (TW.) 146.10p 1.95%
Barratt Developments (BDEV) 474.60p 1.91%
United Utilities Group (UU.) 881.00p 1.79%
Severn Trent (SVT) 2,165.00p 1.64%
FTSE 100 - Fallers
Standard Chartered (STAN) 622.40p -5.55%
Mondi (MNDI) 1,504.00p -5.47%
Fresnillo (FRES) 1,493.00p -5.27%
Randgold Resources Ltd. (RRS) 6,105.00p -4.39%
Hikma Pharmaceuticals (HIK) 1,629.00p -3.84%
Polymetal International (POLY) 846.50p -3.81%
Smiths Group (SMIN) 1,391.00p -3.80%
Old Mutual (OML) 184.60p -3.75%
Burberry Group (BRBY) 1,391.00p -3.47%
Royal Dutch Shell 'B' (RDSB) 2,062.50p -3.42%
FTSE 250 - Risers
Countrywide (CWD) 204.80p 3.54%
Cranswick (CWK) 2,218.00p 3.16%
Kaz Minerals (KAZ) 362.40p 2.95%
Daejan Holdings (DJAN) 5,570.00p 2.77%
Pennon Group (PNN) 808.00p 2.60%
Inmarsat (ISAT) 740.50p 2.42%
Workspace Group (WKP) 678.00p 2.26%
Bellway (BWY) 2,432.00p 2.01%
AO World (AO.) 169.40p 1.99%
Aldermore Group (ALD) 198.60p 1.85%
FTSE 250 - Fallers
SIG (SHI) 93.60p -19.17%
Ashmore Group (ASHM) 305.80p -6.83%
IMI (IMI) 920.50p -5.78%
Acacia Mining (ACA) 471.50p -5.61%
Aberdeen Asset Management (ADN) 293.60p -5.35%
Hochschild Mining (HOC) 248.80p -5.11%
JPMorgan Emerging Markets Inv Trust (JMG) 664.50p -4.94%
Amec Foster Wheeler (AMFW) 428.70p -4.88%
Tullow Oil (TLW) 250.30p -4.72%
Investec (INVP) 479.90p -4.40%