London close: FTSE falls as pound rallies, Brexit deal in focus

London stocks closed lower on Wednesday despite a strong showing from banks and housebuilders as the pound rallied on news that a Brexit divorce bill has been agreed, with consumer borrowing figures in focus.

The FTSE 100 was down 0.90% to 7,393.56 as sterling rose 0.58% versus the euro to 1.1330 and 0.71% against the dollar to 1.3434, hitting its best level since the end of September. A stronger pound tends to dent the index, as around 70% of its constituents derive most of their earnings from overseas.

European markets were relatively mixed with the DAX down 0.02% to 13,061.87, the CAC 40 0.14% firmer at 5,398.05 and the IBEX 35 up 1.22% to 10,267.70.

According to various reports, the UK government has agreed to pay a Brexit divorce bill of between €40bn and €65bn (£35bn to £58bn), much higher than the €20bn Prime Minister Theresa May said she was prepared to commit back in September.

David Cheetham, chief market analyst at XTB, said: "The decision to bow to EU demands has removed one of the biggest obstacles to the divorce settlement and if citizens' rights, and the contentious question surrounding what to do with the border between Northern Ireland and the Republic can be resolved promptly then talks can hopefully progress to future trade relations."

With Brexit the primary focus, UK investors followed their US counterparts in largely shrugging off claims by North Korea that it has successfully tested a new type of ballistic missile that is capable of striking anywhere on the US mainland.

Market participants were also digesting the latest figures from the Bank of England, which showed consumer borrowing cooled in October. Unsecured debt rose by £1.45bn in October, down from £1.48bn in September and £1.8bn in August, BoE figures showed.

The annual rate fell to 9.6% from 9.8% the previous month and 10% in August. October's figure was the lowest for 18 months.

The BoE cited consumer borrowing when it increased interest rates to 0.5% from 0.25% on 2 November. In September the BoE warned banks they risked underestimating bad debts from consumer loans and urged them to tighten loan criteria.

The BoE figures also showed a slight fall in mortgage approvals for house purchases to 64,575 – the lowest since September 2016. But remortgage approvals rose to 51,593 – the highest since October 2008.

In corporate news, Cineworld tumbled after confirming it will make a $3.07bn (£2.3bn) offer for US peer Regal Entertainment, which it plans to fund through new debt and by raising funds via a rights issue.

London Stock Exchange was in the black as it announced that chief executive Xavier Rolet has left the company after weeks of wrangling over the terms of his departure, while IT infrastructure provider Softcat edged down despite saying it saw a strong start to the year.

Zoopla and PrimeLocation owner ZPG turned lower after posting a jump in full-year revenue and saying it has agreed to acquire Netherlands-based automated property valuation and statistical market analysis firm Calcasa for €30m.

On the upside, banks and housebuilders - the sectors that have taken the biggest hit due to Brexit concerns - rose on the back of Brexit breakthrough hopes, with RBS, Barclays, Lloyds, Persimmon and Barratt all in the black.

Soft drinks maker Britvic fizzed higher as its full-year profit beat expectations and it lifted its full-year dividend per share by 8.2%.

Stagecoach ticked higher as it welcomed the planned “new direction” for the UK rail network, as announced by the Department for Transport.

FirstGroup reversed earlier losses to trade up as it welcomed a new strategic vision for the Great Western rail network from the DFT, which confirmed it would exercise its option to extend First’s franchise in the region by one year, to 1 April 2020.

Tullow Oil gushed a little higher after saying it has secured $2.5bn of debt refinancing, while water utility Pennon was up after it posted a 2.3% increase in half-year pre-tax profit to £131.1m.

In broker note action, Spire Healthcare surged after Berenberg upgraded the stock to 'buy', while Equiniti was up after an initiation at 'buy' from Berenberg, but Fidessa was under pressure after an initiation at 'sell' from Stifel.

Market Movers

FTSE 100 (UKX) 7,393.56 -0.90%
FTSE 250 (MCX) 20,059.58 0.17%
techMARK (TASX) 3,462.81 -0.97%

FTSE 100 - Risers

Next (NXT) 4,503.00p 4.38%
Kingfisher (KGF) 336.50p 4.18%
Royal Bank of Scotland Group (RBS) 281.60p 3.83%
Marks & Spencer Group (MKS) 312.40p 3.79%
Barclays (BARC) 193.70p 3.68%
Berkeley Group Holdings (The) (BKG) 3,842.00p 3.64%
Lloyds Banking Group (LLOY) 67.10p 3.50%
Sainsbury (J) (SBRY) 235.60p 2.66%
BT Group (BT.A) 255.40p 2.57%
Barratt Developments (BDEV) 609.00p 2.35%

FTSE 100 - Fallers

Randgold Resources Ltd. (RRS) 6,915.00p -5.98%
Sage Group (SGE) 779.00p -3.89%
Fresnillo (FRES) 1,303.00p -3.62%
Micro Focus International (MCRO) 2,498.00p -3.44%
Worldpay Group (WPG) 418.00p -3.37%
British American Tobacco (BATS) 4,802.00p -3.36%
Scottish Mortgage Inv Trust (SMT) 452.90p -3.12%
Carnival (CCL) 4,859.00p -3.01%
Imperial Brands (IMB) 3,046.00p -2.90%
3i Group (III) 915.50p -2.76%

FTSE 250 - Risers

Ocado Group (OCDO) 359.60p 16.15%
Stagecoach Group (SGC) 180.70p 13.07%
Britvic (BVIC) 808.87p 6.92%
Dixons Carphone (DC.) 164.60p 6.88%
Pets at Home Group (PETS) 170.00p 5.85%
Greencore Group (GNC) 206.90p 5.13%
Spire Healthcare Group (SPI) 247.90p 5.04%
Close Brothers Group (CBG) 1,408.00p 4.84%
Brown (N.) Group (BWNG) 281.70p 4.02%
Travis Perkins (TPK) 1,586.00p 4.00%

FTSE 250 - Fallers

Cineworld Group (CINE) 557.00p -19.80%
Acacia Mining (ACA) 172.90p -7.58%
RPC Group (RPC) 894.50p -7.26%
ZPG Plc (ZPG) 321.70p -6.75%
Hochschild Mining (HOC) 238.30p -4.72%
Ferrexpo (FXPO) 249.90p -3.77%
Clarkson (CKN) 2,814.00p -3.43%
Centamin (DI) (CEY) 140.00p -3.05%
Smith (DS) (SMDS) 542.50p -2.78%
Victrex plc (VCT) 2,419.00p -2.73%