London close: Stocks dip as pound gains altitude on talk of Brexit delay

The FTSE 100 dipped by 0.36% or 24.69 points to finish at 6,918.18 as the pound put on 0.81% against the US dollar to 1.2856 - having briefly traded above $1.2830 for the first time since late November - and 0.96% versus the euro to 1.1191 on the back of an Evening Standard report suggesting that Brexit was likely to be delayed beyond the scheduled exit of 29 March.

However, the report was swiftly denied by Theresa May's spokeswoman Alison Donnelly.

Be that as it may, IG's Chris Beauchamp said: "As the UK hurtles towards Tuesday’s meaningful vote, the signs of a shift in position become clearer. Time is fast running out, but with so much still to be done an extension to Article 50 becomes vital.

"Cable continues to trade as if an extension is very much on the cards, underscoring the point that markets would still very much prefer to forget the whole thing ever happened in the first place."

Also weighing on the top flight index was what analysts termed a "solid" reading on core US consumer prices for December, which were unchanged at up by 2.2% year-on-year. That saw the US dollar rebound against most currencies and in turn weighed on crude oil futures, with Brent slipping 1.53% to $60.73 a barrel on the ICE.

To take note of as well, amid talk that Germany and Italy might both have entered into a technical recession at the end of 2018, there was growing speculation in markets that the European Central Bank would be forced to push back the timing of its first interest rate hike, possibly into 2020.

The FTSE 100 had kicked the session off on the front foot after a positive finish on Wall Street, after Treasury Secretary Steve Mnuchin said China’s lead trade official, Vice Premier Liu He, would "most likely" head over to the US for further trade talks later this month.

"That comment appears to have renewed hopes that the recent get-together in Beijing, though not producing any concrete progress just yet, was nevertheless a step towards an eventual trade war resolution," said Spreadex analyst Connor Campbell.

On home turf, the latest figures from the Office for National Statistics showed UK gross domestic product growth slowed towards the end of last year as factory output fell for a fifth month in a row.

Economic growth slowed to 0.3% for the three months to November, as expected, while GDP grew 0.2% month-on-month in November, better than the 0.1% forecast. GDP growth was down from the 0.4% in the three months to October, 0.6% in the period to September and the lowest in six months.

Industrial production unexpectedly fell by 0.4% month-on-month in November and was down 1.5% year on year. Economists had forecast a 0.2% increase after falling for four months in a row.

Manufacturing production was down 0.3% on the month and down 1.1% on the previous year, both much worse than expected and the sector’s worst losing run since the financial crisis.

While factory numbers were disappointing, Black Friday boosted output in the retail sector to 1.4%, while there was a 0.3% month-to-month increase in services output and 0.6% increase in construction output.

"There are two factors at work here," said Ben Brettell, senior economist at Hargreaves Lansdown. "The global economy looks to be stuttering, with the ‘Chimerica’ trade war rumbling on, and Chinese consumer spending on a downward trend. UK companies are also dealing with a significant Brexit headwind, with heightened levels of uncertainty putting business off investment and damaging consumer confidence."

Among individual shares, housebuilders were the standout gainers as Bank of America Merrill Lynch upgraded its stance on the sector to 'neutral' from 'underperform'. It double-upgraded "top picks" Persimmon and Taylor Wimpey to 'buy', and lifted Barratt Developments and Bellway to 'neutral' from 'underperform'.

"It seems at least possible, or even probable, that some sort of Brexit resolution is within sight and therefore the UK housebuilding sector may see some relief," it said.

Elsewhere, Southend airport owner Stobart gained as it teamed up with Virgin Atlantic and Cyrus Capital Partners to buy British regional airline Flybe for 1p a share, valuing the company at £2.2m.

Builders merchant Grafton rallied after saying it expects adjusted profits for 2018 to be slightly ahead of the top end of analyst expectations, while pub operator Ei ticked a touch lower as it agreed to dispose of 370 properties to Tavern Propco Limited for £348m.

Outside the FTSE 350, retailers were in focus again, with fast fashion brand Quiz tanking 32% as it issued its second profit warning in three months after a difficult Christmas period, but Moss Bros on the rise after saying it expects to make a full-year loss in line with market forecasts as deep discounting put a squeeze on margins.

Meanwhile, Debenhams tumbled as its chief executive and chairman were voted off the board after major shareholder Sports Direct engineered a coup at the embattled department store group's annual meeting.

Elsewhere, Sage was knocked lower by a cut to 'sell' at UBS, while UDG Healthcare and NMC Health were hit by a Jefferies note.

Market Movers

FTSE 100 (UKX) 6,918.18 -0.36%
FTSE 250 (MCX) 18,542.31 0.58%
techMARK (TASX) 3,392.87 -0.43%

FTSE 100 - Risers

Taylor Wimpey (TW.) 156.05p 4.80%
Persimmon (PSN) 2,205.60p 4.36%
Barratt Developments (BDEV) 503.40p 2.90%
International Consolidated Airlines Group SA (CDI) (IAG) 610.00p 2.56%
easyJet (EZJ) 1,162.50p 2.01%
Centrica (CNA) 135.20p 1.81%
British American Tobacco (BATS) 2,547.00p 1.68%
Rightmove (RMV) 470.90p 1.37%
Informa (INF) 656.80p 1.33%
Reckitt Benckiser Group (RB.) 6,177.00p 1.31%

FTSE 100 - Fallers

NMC Health (NMC) 2,774.00p -5.05%
Smurfit Kappa Group (SKG) 2,158.00p -4.55%
AstraZeneca (AZN) 5,712.00p -3.56%
Melrose Industries (MRO) 170.80p -3.34%
Smith (DS) (SMDS) 333.38p -3.05%
Rentokil Initial (RTO) 346.10p -2.29%
Sage Group (SGE) 608.00p -2.09%
Spirax-Sarco Engineering (SPX) 6,405.00p -1.61%
TUI AG Reg Shs (DI) (TUI) 1,175.42p -1.55%
Standard Life Aberdeen (SLA) 265.70p -1.37%

FTSE 250 - Risers

Stobart Group Ltd. (STOB) 160.80p 7.20%
Euromoney Institutional Investor (ERM) 1,290.00p 5.01%
Hunting (HTG) 552.00p 5.00%
Grafton Group Units (GFTU) 730.00p 4.29%
Domino's Pizza Group (DOM) 264.70p 4.01%
Computacenter (CCC) 1,070.00p 3.88%
Cairn Energy (CNE) 182.30p 3.87%
Moneysupermarket.com Group (MONY) 292.30p 3.87%
Dixons Carphone (DC.) 131.80p 3.78%
Babcock International Group (BAB) 541.00p 3.48%

FTSE 250 - Fallers

UDG Healthcare Public Limited Company (UDG) 578.00p -7.74%
Hastings Group Holdings (HSTG) 194.60p -2.44%
CYBG (CYBG) 183.90p -2.39%
Just Eat (JE.) 617.80p -2.00%
Lancashire Holdings Limited (LRE) 588.00p -1.92%
Sophos Group (SOPH) 380.80p -1.81%
Renishaw (RSW) 4,078.00p -1.73%
Ted Baker (TED) 1,924.00p -1.69%
Hilton Food Group (HFG) 952.00p -1.65%
Funding Circle Holdings (FCH) 313.00p -1.65%