London close: Footsie ends lower as pound gains ground

London stocks finished lower on Monday as sterling got a lift from better-than-expected growth figures and Prime Minister Boris Johnson said he would "overwhelmingly" prefer a Brexit deal with the EU.

The FTSE 100 was down 0.64% at 7,235.81, while sterling - which was also benefiting from the fact an early election looked increasingly unlikely - reversed losses to trade up 0.6% against the US dollar to 1.2353 while versus the euro it added 0.29% and was changing hands at 1.1173.

The gains came as data from the Office for National Statistics showed that in July gross domestic product grew by 0.3% on the month compared to no growth in June, beating expectations for a 0.1% expansion.

This helped to alleviate concerns of a recession following a 0.2% contraction in the second quarter, which marked the first time the economy had shrunk since the fourth quarter of 2012.

Growth in the three months to July was flat, however, with falls in construction and manufacturing, although this was an improvement on the 0.2% drop seen in June and better than consensus expectations for a 0.1% dip.

The services sector grew by 0.3% in July following four months of stagnation, while manufacturing and construction rose 0.3% and 0.5% on the month, respectively.

Head of GDP Rob Kent-Smith said: "While the largest part of the economy, services sector, returned to growth in the month of July, the underlying picture shows services growth weakening through 2019.

"The trade deficit narrowed due to falling imports, particularly unspecified goods (including non-monetary gold), chemicals and road vehicles in the three months to July."

David Cheetham, chief market analyst at XTB, said: "While the figures are from stellar, after a contraction in the second quarter the chances that we see a negative GDP print in the third have now dropped significantly, meaning that a technical recession will likely be avoided."

Sterling was also underpinned by comments from Johnson, who appeared to strike a different tone during Brexit talks in Dublin, saying that no-deal Brexit would be a "failure of statecraft" and that he would "overwhelmingly prefer to get an agreement".

His comments followed the resignation of Work & Pensions Secretary Amber Rudd over the weekend and came as opposition leaders confirmed that they would not support the PM's motion for an election on Monday evening.

In equity markets, Associated British Foods was in the red as it backed its full-year guidance but cautioned that profit margins at Primark are expected to drop next year.

Lloyds Bank reversed early losses after it announced that it was suspending the rest of its 2019 share buyback after a higher-than-expected spike in payment protection claims ahead of the August deadline led to an increased provision for potential payouts.

British Airways parent IAG flew lower as BA cancelled nearly all of its flights due to a two-day strike. More broadly, the sector took a hit after Air France-KLM warned over weaker-than-expected bookings. Traders also pointed to speculation that Air France could make an offer for bankrupt budget airline Aigle Azur.

On the upside, shares of shopping centre owner Intu Properties surged following a report over the weekend that private equity firm Orion Capital Managers is considering a buyout. According to The Sunday Times, Orion - which already has a 9.2% stake in Intu - is in the early stages of seeking partners for a buyout of the company, whose rental income fell nearly 18% in the six months to June.

Broker Peel Hunt said any buyer would need a strategy and the resources to deal with Intu’s £4.9bn of net debt and in particular the significant maturities in 2021-23, which total over £2.5bn.

"Trading at an 85% discount to net asset value and with no dividends being paid at present we believe the shares remain highly speculative," it said.

Market Movers

FTSE 100 (UKX) 7,235.81 -0.64%
FTSE 250 (MCX) 19,678.45 -0.14%
techMARK (TASX) 3,815.47 -1.30%

FTSE 100 - Risers

Aviva (AV.) 374.10p 2.86%
Carnival (CCL) 3,603.00p 2.50%
Royal Bank of Scotland Group (RBS) 192.95p 2.50%
Prudential (PRU) 1,441.00p 2.49%
NMC Health (NMC) 2,826.00p 2.17%
Kingfisher (KGF) 201.10p 2.12%
Legal & General Group (LGEN) 236.40p 1.85%
Standard Life Aberdeen (SLA) 255.60p 1.63%
Standard Chartered (STAN) 659.60p 1.57%
ITV (ITV) 122.35p 1.49%

FTSE 100 - Fallers

Rentokil Initial (RTO) 448.60p -3.59%
AstraZeneca (AZN) 7,004.00p -3.46%
Coca-Cola HBC AG (CDI) (CCH) 2,715.00p -3.42%
London Stock Exchange Group (LSE) 7,080.00p -3.31%
Aveva Group (AVV) 3,658.00p -3.28%
Fresnillo (FRES) 696.40p -3.17%
Barratt Developments (BDEV) 594.40p -3.03%
Just Eat (JE.) 760.00p -2.91%
Compass Group (CPG) 2,025.00p -2.91%
Relx plc (REL) 1,915.50p -2.67%

FTSE 250 - Risers

Intu Properties (INTU) 40.34p 10.47%
Aston Martin Lagonda Global Holdings (AML) 578.20p 7.83%
IP Group (IPO) 68.10p 6.43%
HGCapital Trust (HGT) 237.00p 6.04%
Provident Financial (PFG) 403.70p 4.64%
Funding Circle Holdings (FCH) 110.20p 4.35%
Hastings Group Holdings (HSTG) 198.40p 3.88%
Premier Oil (PMO) 85.00p 3.51%
Synthomer (SYNT) 326.60p 3.16%
Dixons Carphone (DC.) 118.35p 3.05%

FTSE 250 - Fallers

Daejan Holdings (DJAN) 4,715.00p -7.91%
Acacia Mining (ACA) 237.60p -5.71%
Hochschild Mining (HOC) 198.60p -5.25%
Hikma Pharmaceuticals (HIK) 1,918.00p -3.88%
Bakkavor Group (BAKK) 108.60p -3.59%
Assura (AGR) 69.30p -3.35%
Future (FUTR) 1,276.00p -3.03%
Centamin (DI) (CEY) 139.00p -3.00%
Syncona Limited NPV (SYNC) 245.00p -2.97%
SIG (SHI) 117.80p -2.89%