London midday: Stocks drop ahead of US-China talks but retailers buck trend
London stocks had fallen into the red by midday on Monday, with tobacco shares dragged lower by a broker downgrade, but retailer Dunelm sharply higher after a well-received trading update.
The FTSE 100 was down 0.7% at 6,793.02, while the more domestically focused FTSE 250 remained in positive territory. Sterling was up 0.1% against the dollar at 1.2735 and 0.2% lower versus the euro at 1.1144.
Investors were eyeing the latest round of trade talks between the US and China, with officials from both sides due to meet for talks in Beijing later in the day in what will be the first discussions since Trump and Xi Jinping agreed a temporary truce in December.
"Realistically we are unlikely to see any form of tangible breakthrough in the immediate future, with issues such as the protection of intellectual property rights providing a major stumbling block that needs to be overcome," said Joshua Mahony, senior market analyst at IG.
On home turf, with the so-called "meaningful vote" on Brexit set to take place in the House of Commons on 15 January, Theresa May was still trying to extract concessions from the European Union to make her deal more palatable for Conservative MPs.
Meanwhile Germany’s foreign affairs minister Heiko Maas was set to hold talks in Dublin on Tuesday in an effort to find a solution to help May, who insisted over the weekend that she could get assurances from Brussels to ensure ratification of her deal.
However, it was not expected that this would involve re-opening the agreement she struck last year. EU officials fear that changing the deal over the Irish issue would invite demands for concessions from other states unhappy with aspects of the text.
In the US, meanwhile, the government shutdown entered its third week. As a compromiss, Trump promised over the weekend to build his Mexico border wall out of steel instead of concrete and repeated the threat that he may seek the necessary funding by declaring a state of emergency.
Broker notes provided a lot of the share price action, with Imperial Brands and British American Tobacco among the worst performers on the FTSE 100 as Cowen cut its stance on both stocks to 'market perform' from 'outperform'.
Centrica was hit by a downgrade to 'hold' at Jefferies, while St James's Place, Hargreaves Lansdown and Standard Life Aberdeen were lower after downgrades at Deutsche Bank.
InterContinental Hotels was weaker after a cut to 'underweight' at Morgan Stanley, HSBC was in the red after a downgrade to 'sell' at Citi and Funding Circle was knocked lower by a downgrade to 'neutral' at Bank of America Merrill Lynch.
Equiniti gave up earlier gains to trade a touch lower as it won a contract to run the UK media and telecoms watchdog's scheme to compensate users of radio spectrum that is being cleared for use in 5G mobile services.
On the upside, homewares group Dunelm surged as it struck a note of caution about full-year results due to "unprecedented" uncertainty caused by Brexit, but posted 9% growth in total like-for-like sales for the second quarter, with LFL stores revenue up 5.7% year-on-year and online revenue 37.9% higher.
The retail sector will be firmly in focus this week as updates are due from Marks and Spencer, Wm Morrison, Sainsbury and Tesco, all of which kicked the week off in the green.
CMC Markets analyst Michael Hewson said they could also surprise to the upside, given the numbers from German discount supermarket Aldi earlier on Monday, which reported record Christmas sales. "The big question here is how much did the two young upstarts of Aldi and Lidl steal the big four’s Christmas lunch," he said.
Sticking with retail, Ted Baker - which was recently rocked by allegations of harassment against CEO and founder Ray Kelvin - was under the cosh ahead of its trading update on Wednesday, as RBC Capital Markets slashed its price target on the outperform-rated sock to 2,000p from 2,500p.
On the upside, Petrofac was boosted by an upgrade to 'buy' at Jefferies, while Mediclinic rose on the back of an upgrade to 'overweight' at JPMorgan and Hays gained as HSBC bumped it up to 'buy'.
Market Movers
FTSE 100 (UKX) 6,793.02 -0.65%
FTSE 250 (MCX) 17,879.56 0.47%
techMARK (TASX) 3,330.92 0.07%
FTSE 100 - Risers
Fresnillo (FRES) 909.40p 3.91%
Sainsbury (J) (SBRY) 266.60p 2.54%
NMC Health (NMC) 2,680.00p 2.29%
Antofagasta (ANTO) 802.40p 2.14%
Carnival (CCL) 3,879.00p 1.86%
Marks & Spencer Group (MKS) 256.90p 1.50%
Pearson (PSON) 976.80p 1.43%
TUI AG Reg Shs (DI) (TUI) 1,175.50p 1.42%
Whitbread (WTB) 4,745.00p 1.39%
Ashtead Group (AHT) 1,725.00p 1.35%
FTSE 100 - Fallers
Centrica (CNA) 130.92p -4.64%
Imperial Brands (IMB) 2,353.50p -4.04%
Smurfit Kappa Group (SKG) 2,130.00p -2.92%
British American Tobacco (BATS) 2,510.00p -2.83%
Reckitt Benckiser Group (RB.) 5,827.00p -2.30%
BAE Systems (BA.) 462.40p -2.24%
HSBC Holdings (HSBA) 642.70p -2.10%
InterContinental Hotels Group (IHG) 4,127.00p -2.02%
Rolls-Royce Holdings (RR.) 810.40p -1.86%
Standard Chartered (STAN) 597.00p -1.78%
FTSE 250 - Risers
Dunelm Group (DNLM) 637.50p 10.20%
Clarkson (CKN) 2,225.00p 4.22%
Entertainment One Limited (ETO) 370.80p 4.04%
Vesuvius (VSVS) 512.00p 3.60%
TP ICAP (TCAP) 317.60p 3.22%
Amigo Holdings (AMGO) 278.95p 3.20%
Stagecoach Group (SGC) 141.90p 3.20%
Provident Financial (PFG) 622.80p 3.04%
Stobart Group Ltd. (STOB) 157.00p 3.02%
Aveva Group (AVV) 2,390.00p 3.02%
FTSE 250 - Fallers
Indivior (INDV) 120.80p -4.66%
Ted Baker (TED) 1,538.00p -3.03%
Just Group (JUST) 94.80p -2.17%
Royal Mail (RMG) 281.50p -1.88%
Tate & Lyle (TATE) 661.60p -1.64%
Centamin (DI) (CEY) 120.55p -1.55%
Quilter (QLT) 118.92p -1.41%
CYBG (CYBG) 187.40p -1.37%
Britvic (BVIC) 815.00p -1.33%
Games Workshop Group (GAW) 3,060.00p -1.29%