London close: Shares sharply lower as pound pops higher, Gilts retreat

London stocks fell sharply at the end of the week, tracking losses around the globe on the back of rising government bond yields.

In parallel, positive headlines around Brexit saw the pound snap higher again, adding to the negative tone in the stockmarket.

The FTSE 100 was down by 1.35% or 99.80 points to 7,318.54, while the pound was up 0.6% against the dollar at 1.30993 and 0.62% firmer versus the euro at 1.1379 following a Reuters report that EU Brexit negotiators see a divorce deal as being close.

The UK and EU were inching closer to a deal on a backstop solution for the Irish border that would break the impasse in Brexit talks, The Times reported, while Reuters revealed that EU negotiators had told national diplomats in Brussels late on Thursday that a divorce deal with Britain was "very close".

Later in the session, Bloomberg reported that the European Union is ready to offer the UK a free-trade deal deeper than any previous proposal but will not meet Theresa May’s demand for a "frictionless trade".

The EU's plan would reportedly contain "30-40% of May's proposal" regarding trade and a security deal, Bloomberg's sources said.

Still, Lukman Otunuga, research analyst at FXTM, said it may be too early to celebrate.

In the background meanwhile, yields on the benchmark 10-year UK Gilt were adding five basis points to 1.72% and notching up a fresh 52-week high in the process, mimicking similar moves across the Pond in US Treasury note yields.

Feeding the rise in US yields, on Friday the Department of Labor reported that non-farm payrolls in the States increased by 134,000 last month, falling well short of economists' consensus forecast for a rise of 188,000.

But analysts linked much of the 'miss' to the impact of hurricane Florence, pointing instead to the large upwards revision of 87,000 for the prior two months of payrolls combined and to the two tenths of a percentage point drop in the rate of unemployment to 3.7% - to its lowest since 1969.

Commenting on Friday's jobs data, Ian Shepherdson, the chief economist at Pantheon Macroeconomics, said: "The unemployment rate continues to trend down, and is on course for about 3-1/4% a year from now, barring a miraculous rise in the participation rate. Don’t bet on that; it's still not moving. No-one at the Fed thinks unemployment near 3% is sustainable, especially if the trend is still falling steadily at the time unemployment hits that level.

"Accordingly, we remain firmly of the view that the Fed will hike again in December and is on course to raise rates next year by at least the 75bp median dot plot forecast."

Back in the UK, data released earlier by mortgage lender Halifax showed house prices fell last month at their fastest pace since April. Prices were down 1.4% on the month following a 0.2% drop in August, missing expectations of a 0.2% increase. August's growth was revised down from 0.1%.

On the year, prices were 2.5% higher compared to a 3.7% increase in August, falling short of expectations of a 3.3% gain.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the drop reflects the usual volatility, but imminent increases in mortgage rates will dampen demand.

INTU POPS, UNILEVER BUCKLES

In UK corporate news, Intu Properties bucked the trend, surging over 27% as it emerged that one of the company's senior directors is leading a consortium of investment companies to buy the shopping centre owner. Deputy chairman John Whittaker's Peel Group has teamed up with Saudi conglomerate Olayan Group and Canary Wharf owner Brookfield Property Group to launch possible offer for Intu.

British Land, Land Securities, Hammerson and Capital & Counties all rallied on the news.

Real estate investment trust Assura was up after saying it has completed a further three acquisitions for £50m, taking its total spend for the year to £158m.

Centamin tumbled after the gold miner cut its full-year production target as it posted a drop in quarterly output.

Unilever edged lower as the company said its directors have decided to withdraw their proposal to move out of the UK to a single Netherlands headquarters after growing opposition from shareholders large and small.

In broker note action, Antofagasta was hit by a downgrade to 'sell' at Goldman Sachs, while Bodycote was lifted to 'buy' at HSBC and Intertek was boosted to 'buy' by Berenberg.

Rentokil was upgraded to 'buy' at Stifel and Royal Mail was cut to 'sell' at Citi. CLS Holdings was started at 'buy' by Berenberg, while CYBG and Metro Bank were initiated at 'sell' and 'buy' respectively by Societe Generale.

Market Movers

FTSE 100 (UKX) 7,318.54 -1.35%
FTSE 250 (MCX) 19,918.03 -0.85%
techMARK (TASX) 3,434.33 -1.28%

FTSE 100 - Risers

Severn Trent (SVT) 1,812.00p 1.83%
Rentokil Initial (RTO) 334.10p 1.74%
British Land Company (BLND) 585.20p 1.46%
Informa (INF) 748.40p 1.24%
National Grid (NG.) 786.40p 1.21%
Associated British Foods (ABF) 2,289.00p 1.19%
easyJet (EZJ) 1,208.50p 1.13%
Smurfit Kappa Group (SKG) 2,816.00p 1.08%
BT Group (BT.A) 230.10p 1.05%
Land Securities Group (LAND) 848.60p 1.00%

FTSE 100 - Fallers

Antofagasta (ANTO) 827.00p -5.44%
Ocado Group (OCDO) 803.40p -4.79%
Anglo American (AAL) 1,669.20p -4.25%
Rio Tinto (RIO) 3,744.50p -4.02%
BHP Billiton (BLT) 1,635.60p -3.90%
Micro Focus International (MCRO) 1,383.00p -3.29%
Evraz (EVR) 553.60p -2.95%
Rightmove (RMV) 452.55p -2.86%
Scottish Mortgage Inv Trust (SMT) 507.80p -2.72%
Royal Mail (RMG) 345.00p -2.62%

FTSE 250 - Risers

Intu Properties (INTU) 189.00p 27.23%
Hammerson (HMSO) 440.40p 2.83%
Marshalls (MSLH) 421.00p 2.33%
Equiniti Group (EQN) 243.00p 1.89%
Hiscox Limited (DI) (HSX) 1,705.00p 1.55%
IP Group (IPO) 127.00p 1.45%
Wizz Air Holdings (WIZZ) 2,586.00p 1.29%
St. Modwen Properties (SMP) 380.80p 1.28%
NewRiver REIT (NRR) 251.00p 1.21%
LondonMetric Property (LMP) 179.00p 1.13%

FTSE 250 - Fallers

Centamin (DI) (CEY) 91.34p -16.01%
Plus500 Ltd (DI) (PLUS) 1,310.00p -5.82%
Vivo Energy (VVO) 118.20p -5.67%
JPMorgan Indian Investment Trust (JII) 580.00p -4.79%
Kaz Minerals (KAZ) 526.00p -4.57%
Aveva Group (AVV) 2,696.00p -4.40%
Softcat (SCT) 786.00p -4.38%
Premier Oil (PMO) 135.10p -4.05%
Greene King (GNK) 482.90p -3.84%
Coats Group (COA) 81.30p -3.67%