London midday: Stocks drop ahead of confidence vote; housebuilders buck up

The FTSE 100 was down 0.6% at 6,856.66, while the pound held its own, trading down just 0.1% against the dollar at 1.2853 and up 0.2% versus the euro at 1.1292.

After the government lost the 'meaningful vote' on May's Brexit plan by a record margin of 432 to 202, Labour leader Jeremy Corbyn tabled a vote of no confidence in the government.

May said if her government wins the confidence motion this evening, which is expected after the DUP and hardline Brexiteers guaranteed their backing, she will then open up Brexit negotiations to a cross-party approach. She will then have until the end of next Monday to put forward a 'plan B' on Brexit.

Michel Barnier, the EU's chief Brexit negotiator, insisted on Wednesday that the deal that was rejected by parliament was still the "best compromise" that can be offered.

Meanwhile Chancellor Philip Hammond suggested in a conference call with business leaders on Tuesday evening that the government was open to extending Article 50 to avoid a no-deal scenario, although Andrea Leadsom dismissed the possibility.

Speaking to the BBC, the Leader of the Commons said: "We’re clear we won’t be delaying Article 50, we won’t be revoking it. What we need to do is to find a way that [Mrs May’s] deal or some part of it or an alternative deal that is negotiable can then be put to the European Union."

Russ Mould, investment director at AJ Bell, said: "In essence the market believes we are going to get more time for negotiations, we’re less likely to have a hard, economically-damaging Brexit, or Brexit won’t happen at all. The EU has already said it isn’t going to negotiate further and there remains great uncertainty over how events will play out, which suggests any stability in the markets could be short-lived.

“It seems inevitable that both the pound and the stock market will be volatile for weeks or months to come until we have a definitive answer as to the exact direction of travel for Brexit."

Although the focus was firmly on the latest Brexit developments, investors were also sifting through the latest inflation figures from the Office for National Statistics, which showed inflation eased off as expected at the end of last year due to a drop in fuel prices and airfares.

Year-on-year growth in the headline consumer price index dropped to 2.1% from 2.3%, the Office for National Statistics revealed. On a month-on-month basis, CPI remained at 0.2%, which was also in line with economists' forecasts.

Core CPI, which excludes more volatile prices such as fuel and food, rose unexpectedly to 1.9%, from 1.8%.

Producer input prices grew 3.7% year on year, slowing from 5.3% the month before to the lowest rate since June 2016, while factory output price growth slowed to 2.5% from 3%.

With inflation within touching distance of the Bank of England’s 2% target, Tom Stevenson at Fidelity International said: "All eyes will now be on next week’s UK earnings data to see if our wages have continued to widen the gap with rising prices. With inflation forecast to fall below target next month and for much of 2019, a year of improving purchasing power looks to be the most likely scenario."

In corporate news, education publisher Pearson was the standout loser on the FTSE 100 after saying it expects full-year profits to come in just above the middle of its target range and guiding to growth of 8-18% for 2019. It said adjusted operating profit for 2018 would come in at around £540-545m, narrowing its range from the prior £520-560m. This feeds through to earnings per share of 70-71p.

Distribution and outsourcing company Bunzl was also sharply lower after a downgrade to 'underperform' from 'neutral' at Exane BNP Paribas.

Reckitt Benckiser fell as it announced that Rakesh Kapoor was planning to retire as chief executive by the end of this year, while Cineworld retreated as it posted a jump in full-year revenue on the back of strong US growth, but a dip in UK & Ireland revenue at constant currency.

Housebuilders were the top gainers, led higher by Bovis Homes, which said profits for 2018 are expected to be "slightly ahead" of market consensus following a "significant" improvement in its operational performance. Taylor Wimpey, Persimmon, Barratt Developments and Berkeley were the biggest risers on the top-flight index.

Market Movers

FTSE 100 (UKX) 6,856.66 -0.56%
FTSE 250 (MCX) 18,426.15 -0.02%
techMARK (TASX) 3,354.56 -0.51%

FTSE 100 - Risers

Taylor Wimpey (TW.) 160.43p 3.33%
Persimmon (PSN) 2,271.00p 3.18%
Barratt Developments (BDEV) 511.20p 2.55%
Berkeley Group Holdings (The) (BKG) 3,819.00p 2.52%
NMC Health (NMC) 2,828.00p 2.17%
Legal & General Group (LGEN) 249.70p 2.04%
Severn Trent (SVT) 1,888.50p 1.83%
easyJet (EZJ) 1,191.00p 1.79%
Royal Bank of Scotland Group (RBS) 233.70p 1.65%
International Consolidated Airlines Group SA (CDI) (IAG) 603.80p 1.44%

FTSE 100 - Fallers

Pearson (PSON) 903.60p -7.47%
Evraz (EVR) 457.80p -4.05%
Bunzl (BNZL) 2,350.00p -3.33%
Reckitt Benckiser Group (RB.) 6,088.00p -2.62%
Fresnillo (FRES) 897.40p -2.39%
Melrose Industries (MRO) 165.50p -2.16%
BP (BP.) 513.30p -1.80%
Ashtead Group (AHT) 1,861.00p -1.79%
Hargreaves Lansdown (HL.) 1,814.50p -1.71%
Wood Group (John) (WG.) 560.60p -1.65%

FTSE 250 - Risers

Funding Circle Holdings (FCH) 338.75p 5.86%
Bovis Homes Group (BVS) 970.60p 4.73%
Halfords Group (HFD) 240.00p 4.17%
Metro Bank (MTRO) 1,932.00p 3.43%
Capita (CPI) 116.10p 3.29%
Royal Mail (RMG) 283.20p 3.21%
William Hill (WMH) 168.60p 2.99%
Travis Perkins (TPK) 1,190.50p 2.59%
Charter Court Financial Services Group (CCFS) 270.60p 2.50%
888 Holdings (888) 168.30p 2.43%

FTSE 250 - Fallers

Hochschild Mining (HOC) 162.20p -6.24%
Brewin Dolphin Holdings (BRW) 312.00p -4.88%
Cineworld Group (CINE) 263.60p -4.70%
Acacia Mining (ACA) 186.60p -4.18%
Bodycote (BOY) 759.50p -3.19%
Ashmore Group (ASHM) 361.40p -2.80%
Kaz Minerals (KAZ) 528.40p -2.47%
Rank Group (RNK) 155.60p -2.14%
Tullow Oil (TLW) 196.25p -2.07%
IMI (IMI) 935.00p -1.99%