London close: FTSE falls as risk appetite dims

London stocks stumbled on Tuesday as concerns about Brexit, Italy's budget and US-Saudi tensions dented investors' appetite for risk.

The FTSE 100 fell 1.24% to 6,955.21, its lowest finish since 26 March, while the pound was up 0.2% against the dollar at 1.2991 and 0.1% firmer versus the euro at 1.1320.

Sterling had popped higher earlier in the afternoon on reports emerged that the European Union was prepared to accept the creation of a UK-wide customs union.

Ireland's RTE reported that the Brexit withdrawal agreement will include a specific commitment to arranging a UK-wide customs as part of a separate treaty.

Meanwhile, Italy was still very much in focus as the European Commission rejected Italy's medium-term budget proposals, asking the government in Rome to return to the drawing board and come back within three weeks.

Earlier in the session, Italian premier Giuseppe Conte had reportedly said "there is no plan B", telling Bloomberg: "I have said that the deficit at 2.4% of gross domestic product is the ceiling. I can say that this will be our ceiling."

Conte said the government might be able to make some tweaks, but not on the actual sums of spending involved, adding that "for me that would be difficult, I couldn't accept it."

Yields on 10-year Italian government bonds rose but not to the heights seen last week, with moves on the euro pretty muted as Italy has "three weeks to redo its homework [but] expulsion is not on the cards," said market analyst Neil Wilson at Markets.com.

"Constructive messages are conflicting with the reality which is that Rome and Brussels are not in agreement," Wilson added. "However, it remains the case that some kind of compromise is achieved. The question for traders is the extent to which the market forces Italy’s hand – does it buy the rhetoric from Rome? If it does then yields should spike higher from here before it all shakes out."

Meanwhile, global sentiment was also jittery over the souring relations between the US and Saudi Arabia after President Donald Trump said earlier in the week that he was not satisfied with the kingdom's response over the killing of journalist Jamal Khashoggi.

Turkish President Erdogan stirred the pot with a speech on Tuesday, sparking concerns about a diplomatic crisis in the region. Addressing MPs from his ruling party, Erdogan said there was strong evidence that Khashoggi's killing was premeditated and demanded that Saudi Arabia give answers about where the journalist's body was and who ordered the operation.

On home soil, the Confederation of British Industry released data showing that new orders in the UK manufacturing sector fell at the fastest pace in three years in the three months to October, with investment intentions slashed as business optimism dims due to stuttering Brexit negotiations.

A survey of Britain's industrial sector found a balance of 6% of firms reporting lower orders, down from a -1% balance in the previous survey and the weakest since October 2015 as both domestic orders and export orders both fell into negative territory. Economists had expected another -1% reading.

On the corporate front, GVC Holdings was under the cosh again amid expectations that chancellor Philip Hammond will clamp down on offshore gambling companies in the Budget next week.

Software developer Avast slumped as private equity firm Summit Partners sold 52.5m shares in the cybersecurity provider at 275p each ahead of results on Wednesday.

Hotelier Whitbread was lower after it posted a 2.6% rise in first-half sales and underlying pre-tax profits as weaker consumer demand hit UK growth of its Premier Inn chain.

Schroders was down after it and Lloyds Banking confirmed plans to launch a financial planning business aimed at affluent customers.

Anglo American retreated after reporting a 1% year-on-year increase in third-quarter total production on a copper equivalent basis.

St James's Place was also in the red as flow growth slowed in the third-quarter, though funds under management grew to a record £100.6bn.

Intu Properties lost ground after the shopping centre owner said the value of its properties declined 3% since July due to negative investment sentiment towards UK retail property.

Drinks maker Britvic was on the back foot as online fashion retailer ASOS poached its chief financial officer.

On the upside, Plus500 racked up health gains as it posted a drop in third-quarter revenue on the back of low volatility and new regulations but said trading for 2018 should be ahead of expectations.

International distribution and services group Bunzl ticked up as it said third-quarter revenue increased by 7% at constant exchange rates and announced the acquisition of Volk do Brasil, a distributor of personal protection equipment based in Parana, Brazil, for an undisclosed sum.

Builders' merchant Travis Perkins rallied as it hailed a "solid" third quarter to provide some reassurance after the profit warning a few months back, while precious metals miners Randgold, Fresnillo, Centamin, Polymetal and Hochschild Mining shone as gold prices pushed higher.

Utilities were also on the rise, with United Utilities, Severn Trent and Centrica all up as investors looked for safe havens.

In broker note action, Drax was upgraded to 'add' at AlphaValue and Ascential was lifted to 'buy' at Peel Hunt.

HSBC was cut to 'neutral' at Citi, while CYBG was initiated at 'underweight' by Barclays.

Market Movers

FTSE 100 (UKX) 6,969.32 -1.04%
FTSE 250 (MCX) 18,390.81 -1.96%
techMARK (TASX) 3,260.41 -1.47%

FTSE 100 - Risers

Fresnillo (FRES) 983.00p 9.76%
Randgold Resources Ltd. (RRS) 6,532.00p 3.75%
British American Tobacco (BATS) 3,487.50p 3.73%
easyJet (EZJ) 1,132.50p 2.58%
Imperial Brands (IMB) 2,666.50p 2.18%
Taylor Wimpey (TW.) 153.55p 1.52%
Pearson (PSON) 891.40p 1.48%
Marks & Spencer Group (MKS) 285.20p 1.24%
NMC Health (NMC) 3,230.00p 0.94%
Next (NXT) 5,094.00p 0.79%

FTSE 100 - Fallers

Ocado Group (OCDO) 770.27p -10.02%
GVC Holdings (GVC) 870.50p -7.15%
St James's Place (STJ) 980.20p -5.25%
DCC (DCC) 6,325.00p -5.10%
Scottish Mortgage Inv Trust (SMT) 460.30p -4.75%
Smith (DS) (SMDS) 363.90p -4.49%
Melrose Industries (MRO) 157.40p -4.29%
Schroders (SDR) 2,648.00p -4.23%
Halma (HLMA) 1,237.00p -3.96%
Hargreaves Lansdown (HL.) 1,748.00p -3.90%

FTSE 250 - Risers

Plus500 Ltd (DI) (PLUS) 1,360.00p 8.97%
Crest Nicholson Holdings (CRST) 324.00p 5.88%
IG Group Holdings (IGG) 593.50p 4.40%
Travis Perkins (TPK) 1,020.00p 4.08%
Centamin (DI) (CEY) 105.05p 4.01%
Hochschild Mining (HOC) 173.40p 3.18%
Vivo Energy (VVO) 118.00p 2.63%
Spire Healthcare Group (SPI) 110.11p 2.52%
Metro Bank (MTRO) 2,574.00p 1.42%
Polymetal International (POLY) 738.40p 0.90%

FTSE 250 - Fallers

IntegraFin Holding (IHP) 286.00p -8.33%
Cairn Energy (CNE) 184.90p -7.55%
Indivior (INDV) 181.35p -6.83%
Avast (AVST) 275.25p -6.79%
William Hill (WMH) 204.50p -6.49%
Elementis (ELM) 188.40p -5.80%
Energean Oil & Gas (ENOG) 576.00p -5.73%
888 Holdings (888) 175.20p -5.71%
Premier Oil (PMO) 107.50p -5.70%
Provident Financial (PFG) 507.80p -5.61%