London close: Stocks slip even as sentiment towards UK warms

London stocks finished in the red on Wednesday as sterling pushed to a seven-month high against the US dollar and 21-month high versus the euro amid increased expectations that a no-deal Brexit will be avoided.

The FTSE 100 gave back 0.61% to 7,107.20 - its lowest level in nearly two weeks - as the pound continued to gain ground, tacking on 0.43% against the Greenback to change hands at 1.33152, which was near its highest level since last July, and 0.64% against the euro at 1.1711, topping the 1.17 for the first time since mid-May 2017.

The day before, and in anticipation of votes in Parliament on various proposed amendments to the Prime Minister's Withdrawal proposal, analysts at Barclays Research had said: ""There is still no breakthrough in Brexit negotiations, but tomorrow’s amendments vote could provide further motivation for investors to re-engage in UK assets if the threat of a ‘no deal’ is removed.

"We remain positioned for a soft, orderly and delayed Brexit, i.e. [overweight] UK domestic plays vs. exporters and [underweight] UK vs. Eurozone equities."

It wasn’t just the stronger pound weighing on the FTSE, however.

Marks & Spencer shares fell sharply after the retailer said it will slash its dividend by 40% and conduct a rights issue to raise up to £600m to fund the acquisition of a 50% share in Ocado’s UK retail business.

The joint-venture will trade as Ocado.com but benefit from access to M&S's brand, products and customer database from September 2020 at the latest. Ocado was the standout gainer on the FTSE 100 as the up-front £562.5m cash will enable it to fund investment in all the currently agreed warehouse projects for its international clients.

David Cheetham, chief market analyst at XTB, said: "While the market has reacted angrily to the news by selling M&S stock in droves, the prospects for Ocado appear far more favourable as the firm will not only receive a large chunk of cash but they will also save an estimated £15m a year in sourcing fees that are currently paid Waitrose."

ITV was also lower as it said it was in the "concluding phase of talks" with the BBC to establish a strategic partnership to launch the Britbox video-on-demand service in the UK, but reported a drop in adjusted profit for 2018 and said it was likely to be hit by falling ad sales in the first half of 2019.

Metro Bank was under the cosh, having pushed its full-year results out quietly after the close on Tuesday and confirming a £350m cash call. The challenger bank also said overnight that it had received notification that the PRA and FCA plan to investigate the circumstances and events that led to its risk-weighted adjustment announced last month.

Shares in Ted Baker slid as the fashion retailer warned that profit for the financial year ended 26 January 2019 will be down on the previous year as it takes a hit from currency movements, additional costs following the transition to new systems and a writedown in the value of aged stock.

Wealth manager St James’s Place was in the red as it reported a rise in full-year profits but an easing of new business growth and inflows.

Going the other way, Brexit optimism was leading investors towards banks, with Lloyds, Barclays and RBS all higher, while housebuilder Taylor Wimpey advanced as it posted a jump in full-year profit as completions edged higher amid “robust” demand for new homes.

Playtech rallied as it signed a new long-term agreement with GVC Holdings to provide its services and products to all GVC brands in existing and new markets.

In broker notes, Shell was downgraded to ‘sector perform’ at RBC Capital Markets, Meggitt was cut to ‘neutral’ at JPMorgan and Metro Bank was downgraded to ‘market perform’ at KBW.

Smurfit Kappa was cut to ‘hold’ at Goodbody and Tullow was reduced to ‘hold’ at Jefferies.

Market Movers

FTSE 100 7,107.20 -0.61%

FTSE 250 19,153.75 -0.61%

FTSE 100 - Risers

Taylor Wimpey (TW.) 177.00p +3.54%

Ocado Group (OCDO) 1,019.00p +2.93%

Persimmon (PSN) 2,452.00p +2.34%

Barratt Developments (BDEV) 599.20p +1.70%

Lloyds Banking Group (LLOY) 62.88p +1.58%

Micro Focus International (MCRO) 1,894.50p +1.42%

Royal Bank of Scotland Group (RBS) 263.30p +1.27%

Barclays (BARC) 166.90p +1.21%

Rightmove (RMV) 480.05p +0.91%

Rio Tinto (RIO) 4,425.00p +0.89%

FTSE 100 - Fallers

Marks & Spencer Group (MKS) 265.40p -12.47%

NMC Health (NMC) 2,618.00p -4.31%

Hiscox Limited (DI) (HSX) 1,572.00p -3.79%

St James's Place (STJ) 941.20p -3.64%

TUI AG Reg Shs (DI) (TUI) 804.60p -3.48%

Unilever (ULVR) 3,988.00p -3.13%

ITV (ITV) 127.25p -3.08%

Smurfit Kappa Group (SKG) 2,200.00p -3.00%

Coca-Cola HBC AG (CDI) (CCH) 2,543.00p -2.94%

Hikma Pharmaceuticals (HIK) 1,644.00p -2.78%

FTSE 250 - Risers

SIG (SHI) 126.00p +3.70%

Capita (CPI) 122.00p +3.65%

Plus500 Ltd (DI) (PLUS) 800.00p +3.49%

Rank Group (RNK) 167.40p +3.08%

TBC Bank Group (TBCG) 1,484.00p +3.06%

Weir Group (WEIR) 1,642.50p +2.85%

Rathbone Brothers (RAT) 2,254.00p +2.55%

Galliford Try (GFRD) 747.50p +2.54%

Countryside Properties (CSP) 324.00p +2.21%

Bovis Homes Group (BVS) 1,064.50p +2.16%

FTSE 250 - Fallers

Metro Bank (MTRO) 955.00p -26.54%

Ted Baker (TED) 1,820.00p -9.00%

Centamin (DI) (CEY) 92.86p -4.19%

Pagegroup (PAGE) 444.80p -3.72%

JD Sports Fashion (JD.) 467.10p -3.65%

Bakkavor Group (BAKK) 161.60p -3.23%

Acacia Mining (ACA) 217.80p -3.20%

Merlin Entertainments (MERL) 352.60p -3.13%

Meggitt (MGGT) 534.40p -3.01%

Sabre Insurance Group (SBRE) 269.00p -2.89%