London midday: Stocks pare losses as pounds slips on Moody's warning

London stocks had pared earlier losses by midday on Monday as the pound resumed its slide after Moody's warned over the impact of a hung parliament and Theresa May prepared to meet with Conservative party backbenchers angered by the election result.

The FTSE 100 was down 0.1% to 7,520.22, while the pound was trading down 0.6% against the euro at 1.1314 and 0.5% lower versus the dollar at 1.2685. The pound, which had been fairly steady earlier in the session, retreated again after Moody's cautioned that the election results was "credit negative" for the UK.

A weaker pound tends to boost the FTSE 100, as around 70% of its constituents derive their revenues from abroad.

Neil Wilson, senior market analyst at ETX Capital, said: "This seems to have woken traders from their slumber and the pound is on the defensive as we start the week. It wouldn’t take much bad news from the UK political scene to force cable to take another leg lower. Still there is plenty of bid to catch on the way down as the dips are being viewed as short-term buying opportunities.

"Sentiment remains pretty bearish. As Moody’s points out there is a chance of a softer Brexit but we must also think there is a heightened risk of a cliff-edge exit from the EU.”

A survey from the Institute of Directors added to the downbeat mood as it showed business confidence plunged in the wake of Thursday's general election and subsequent hung parliament.

The poll found that members see no clear way to quickly resolve the political situation, but feel another election this year would be bad for the UK economy. The IoD members who took the survey on Friday said the government's priority must be to reach a new trade deal with the European Union and on the domestic front, to work to deliver a higher skilled workforce and better quality infrastructure.

In addition, investors were digesting data from Visa which showed that UK consumer spending fell 0.8% in May, marking its first year-on-year drop since September 2013.

Prime Minister May was due to meet with Tory backbenchers on Tuesday, but the meeting was brought forward a day after the 1922 Committee demanded to meet the PM earlier than planned. With Brexit negotiations due to start next Monday, it was understood that MPs will be urging May to change her leadership style and take a more pragmatic approach to the UK's divorce proceedings with the EU.

The PM reshuffled her cabinet over the weekend, bringing Michael Gove back into the cabinet as environment secretary, while Damian Green was made first secretary of state, a position seen as a deputy PM to act as a fixer in the Cabinet Office and help to soothe simmering tensions in the party, according to The Times. Meanwhile, previous environment secretary Andrea Leadsom was made leader of the House of Commons, replacing David Lidington as he was appointed justice secretary, replacing Lizz Truss who became chief Treasury secretary, replacing David Gauke who has been appointed work and pensions secretary to replace Green.

Most of the front-bench cabinet jobs, however, such as chancellor of the exchequer, defence and health secretary, were left unchanged, with Philip Hammond and defence secretary Michael Fallon among those putting pressure on May to soften her line on Brexit.

On the corporate front, oil giants Shell and BP gushed higher as oil prices advanced, with West Texas Intermediate and Brent crude both up 1.2%.

Elsewhere, outsourcer Mitie surged after it withheld its final dividend as it tumbled into losses, with the market impressed by the new management team's expectations of a quick return to growth in underlying profits this year.

Weir Group was in the red after announcing an agreement to acquire KOP Surface Products, a provider of advanced surface pressure control technologies, systems and services for the oil and gas industry for $114m in cash.

Rio Tinto was on the back foot after Glencore offered to buy its interest in Coal & Allied Industries for $2.55bn in cash plus a coal price-linked royalty.

Acacia Mining retreated as the Tanzanian government was due to publicly present the results, in Swahili, of an investigation into the disputed gold concentrate exports of the London-listed mining company.

Micro Focus was under the cosh, dented by weakness in the US technology sector which hit the Nasdaq on Friday.

TalkTalk was hit by a downgrade to 'sell' at Berenberg, but was Ashtead was lifted by an upgrade to 'buy' at HSBC.

Market Movers

FTSE 100 (UKX) 7,520.22 -0.09%
FTSE 250 (MCX) 19,714.74 -0.28%
techMARK (TASX) 3,575.60 -0.64%

FTSE 100 - Risers

Royal Dutch Shell 'B' (RDSB) 2,189.00p 1.72%
Royal Dutch Shell 'A' (RDSA) 2,138.50p 1.52%
BP (BP.) 474.45p 1.42%
Tesco (TSCO) 183.20p 1.36%
Johnson Matthey (JMAT) 3,023.00p 1.31%
Anglo American (AAL) 1,095.00p 1.30%
Hikma Pharmaceuticals (HIK) 1,652.00p 1.29%
Centrica (CNA) 201.30p 1.26%
Standard Chartered (STAN) 788.70p 1.09%
Vodafone Group (VOD) 223.00p 0.88%

FTSE 100 - Fallers

Micro Focus International (MCRO) 2,429.00p -2.80%
Scottish Mortgage Inv Trust (SMT) 408.70p -2.22%
Convatec Group (CTEC) 316.80p -2.07%
Sage Group (SGE) 684.00p -1.94%
Fresnillo (FRES) 1,692.00p -1.91%
Worldpay Group (WPG) 308.00p -1.57%
Rolls-Royce Holdings (RR.) 895.00p -1.49%
InterContinental Hotels Group (IHG) 4,368.00p -1.47%
Paddy Power Betfair (PPB) 8,375.00p -1.30%
Coca-Cola HBC AG (CDI) (CCH) 2,301.00p -1.20%

FTSE 250 - Risers

Mitie Group (MTO) 271.60p 10.05%
Tullow Oil (TLW) 171.00p 3.51%
Petrofac Ltd. (PFC) 366.10p 3.48%
Capita (CPI) 546.50p 2.44%
PayPoint (PAY) 947.00p 2.32%
Tate & Lyle (TATE) 744.50p 2.13%
Redefine International (RDI) 39.30p 2.08%
CLS Holdings (CLI) 198.00p 1.90%
Berendsen (BRSN) 1,238.00p 1.89%
Wizz Air Holdings (WIZZ) 2,397.00p 1.78%

FTSE 250 - Fallers

Acacia Mining (ACA) 276.90p -7.73%
Auto Trader Group (AUTO) 397.10p -5.45%
Sophos Group (SOPH) 428.50p -4.76%
Polar Capital Technology Trust (PCT) 1,002.00p -4.48%
OneSavings Bank (OSB) 394.90p -3.21%
Just Eat (JE.) 662.50p -3.00%
Vesuvius (VSVS) 553.50p -2.89%
Hochschild Mining (HOC) 299.30p -2.67%
Ocado Group (OCDO) 282.20p -2.66%
Countryside Properties (CSP) 315.20p -2.57%