London open: Stocks lower as Gilt yields hit post-Brexit high

Stocks started the session moving lower as the yield on the benchmark 10-year Gilt set another post-Brexit high.

At 0822 BST, the FTSE 100 was trading 0.46% or 32.72 points lower at 6,980.72 and the yield on the 10-year Gilt was up by eight basis points to 1.17%.

Cable was trading lower by 0.08% to 1.2175 after earlier hitting an intra-session low of 1.2150.

Gilts underperformed at the end of the previous week, in part tracking losses on US Treasuries after a speech from Fed chair Janet Yellen in which she said that policymakers need to consider the potential benefits of a “high pressure economy” in which the labour market was allowed to tighten more.

Speaking to BBC Radio on Monday morning, Monetary Policy Committee member Ben Broadbent emphasised the importance of a flexible currency when asked whether the Bank of England might intervene in currency markets.

Broadbent also indicated he was not concerned with the possibility that inflation might overshoot the Bank´s target "somewhat".

Against that backdrop, investors were waiting on a speech from US Fed vice chairman, Stanley Fischer, scheduled for later in the day.

At the close of trading in New York on 14 October, Fed funds futures were assigning a 69.5% probability to a 25 basis point interest rate hike by the US central bank when it met in two months´ time.

To take note of - especially for investors in the pharmaceutical sector - the latest WSJ/NBC poll gave US presidential candidate Hillary Clinton an 11 point lead over Donald Trump with just one month to go before the elections and ahead of the following Wednesday´s televised debate.

"Nothing in last week’s US economic data appears to have altered expectations that the Federal Reserve will look to raise interest rates by the end of this year, probably at its meeting in December. The currency markets already appear to be pricing in just such a prospect with the US dollar index closing at its highest level since early March.

"Last week's Fed minutes didn’t really alter that calculus either, in fact they only served to reinforce it, given the fact that recent economic data shows no signs of any significant weakness. Friday’s retail sales numbers for September came in slightly ahead of expectations, more than reversing the small decline seen in August, while weekly jobless claims continue to come down," said Michael Hewson, chief market analyst at CMC Markets.

Pearson starts lower

In corporate news, underlying sales remained underwhelming at Pearson in the third quarter but it reported improving trends since September and that the weakness in the pound is likely to provide a material lift to full year numbers. Sales were down 7% at the underlying level in the nine months to the end of September but were down 3% at headline terms due to the dollar-sterling exchange rate, which could push earnings per share 4.5p higher for the calendar year.

Scottish energy company SSE is to sell a stake in Scotia Gas Networks to subsidiaries of the Abu Dhabi Investment Authority for £621m.

The company will sell 16.7% of its stake and retain 33.3% equity in SGN by the end of the October, with the proceeds used to return value for shareholders or invested, which will be announced on 9 November.

Bookmaker Ladbrokes announced on Monday that subsidiaries of both itself and merger partner Gala Coral Group have agreed to sell a total of 359 licensed betting offices to Done Brothers Cash Betting Limited - trading as Betfred - and StanJames Abingdon - trading as Stan James.

The FTSE 250 firm said Betfred will purchase 322 shops for a cash consideration of £55m, and Stan James will purchase 37 shops for a cash consideration of £0.5m.

Market Movers

FTSE 100 (UKX) 6,972.08 -0.59%
FTSE 250 (MCX) 17,862.99 -0.65%
techMARK (TASX) 3,529.16 -0.42%

FTSE 100 - Risers

Standard Chartered (STAN) 661.40p 1.43%
Anglo American (AAL) 1,014.50p 0.84%
Provident Financial (PFG) 3,059.00p 0.76%
ITV (ITV) 173.60p 0.64%
Glencore (GLEN) 229.65p 0.61%
Rio Tinto (RIO) 2,611.00p 0.58%
Randgold Resources Ltd. (RRS) 6,825.00p 0.37%
Polymetal International (POLY) 852.50p 0.35%
United Utilities Group (UU.) 947.00p 0.32%
Centrica (CNA) 211.60p 0.14%

FTSE 100 - Fallers

Pearson (PSON) 792.50p -4.80%
Persimmon (PSN) 1,672.00p -1.99%
Barratt Developments (BDEV) 474.00p -1.80%
Royal Mail (RMG) 489.10p -1.57%
Mediclinic International (MDC) 901.50p -1.42%
Taylor Wimpey (TW.) 143.20p -1.24%
Royal Bank of Scotland Group (RBS) 170.70p -1.22%
Imperial Brands (IMB) 3,843.00p -1.21%
Next (NXT) 4,549.00p -1.15%
BAE Systems (BA.) 537.00p -1.10%

FTSE 250 - Risers

Euromoney Institutional Investor (ERM) 1,017.00p 2.11%
SIG (SHI) 114.20p 1.42%
Spire Healthcare Group (SPI) 384.20p 1.37%
Vedanta Resources (VED) 643.50p 1.34%
UK Commercial Property Trust (UKCM) 79.80p 1.14%
Aberforth Smaller Companies Trust (ASL) 1,025.00p 0.99%
Sophos Group (SOPH) 249.80p 0.93%
IP Group (IPO) 147.80p 0.82%
Telecom Plus (TEP) 1,115.00p 0.81%
Kaz Minerals (KAZ) 260.20p 0.77%

FTSE 250 - Fallers

PayPoint (PAY) 1,109.00p -5.05%
Debenhams (DEB) 52.75p -4.44%
Countrywide (CWD) 191.50p -3.04%
Rank Group (RNK) 197.80p -2.61%
Ladbrokes (LAD) 135.70p -2.44%
Ted Baker (TED) 2,521.00p -2.29%
OneSavings Bank (OSB) 269.30p -2.25%
Polypipe Group (PLP) 259.70p -2.18%
DFS Furniture (DFS) 248.00p -1.98%
Clarkson (CKN) 1,958.00p -1.95%