London close: Mixed day for stocks as pound surges on May's Brexit U-turn

London's blue-chip benchmark finished in the red on Tuesday but domestically focused stocks climbed higher, as Theresa May offered parliament a vote to prevent a no-deal Brexit sending the pound surging and also lifting hopes for the UK economy.

The FTSE 100 fell 0.45% to 7,151.12 as sterling surged to its highest level against the euro since May 2017 and its highest against the dollar since September after the prime minister said that if her Brexit deal is defeated in parliament next month, she will give MPs two further votes to decide what to do next.

If the government loses the vote on May's Brexit deal on 12 March, the PM told the House of Commons there will then be a vote on 13 March to ask MPs if they want to leave the European Union without a deal. If that is rejected, the following day they will be asked if the UK’s departure – currently slated for 29 March – should be delayed.

The pound rocketed to its highest against the euro since May 2017, 1.1678, and also hit its best point versus the dollar since last September, 1.3284, before dropping off against both currencies. A stronger pound tends to dent the top-flight index as around 70% of its constituents derive most of their earnings from overseas.

"Brexit remains one of the dominant concerns for UK traders, and for the most part, we are seeing the pound provide a clear reference point of how traders perceive the UK’s position ahead of the 29 March deadline," said market analyst Joshua Mahony at IG.

Stocks with prominent exposure to overseas earnings were among the big fallers on the day, ranging from dollar dependent Experian, British American Tobacco and Imperial Brands, to Europe-focused Vodafone.

Domestically focused stocks fared best, from housebuilders Taylor Wimpey, Barratt Developments and Berkeley Group to retailers Next, Sports Direct, Dixons Carphone, JD Sports and WH Smith.

Economist Kallum Pickering at Berenberg said May was "now bending to the will of parliament" and there was a low chance of her deal being passed next month, while also raising the chance of a customs union plus single market for goods and keeping the chance of a comprehensive Norway-plus arrangement unchanged.

He also cut his forecasts for UK economic growth for 2019 as he now saw an expected rebound in demand growth in the third quarter rather than the second but results in higher forecasts for 2020: "Delaying the Brexit date without a proper resolution would merely extend the current uncertainty that is weighing heavily on domestic demand... A longer extension without a resolution would further delay an eventual rebound in demand growth."

On the data front, the latest figures from UK Finance showed mortgage approvals rose 1.5% year-on-year in January, while mortgage re-approvals were down 3.1%, giving an overall rise of 0.3%.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "January’s data indicate that mortgage lending is holding up much better than surveys of house buyer demand have suggested.

"We’re reluctant to conclude, however, that housing market activity is on a sustainable recovery path. The new buyer enquiries balance of the RICS Residential Market Survey fell to its lowest level since June 2008 in January; the balance usually is a great guide to the lending data. The sharp downturn in lending in 2016 also demonstrates that Brexit uncertainty can be very damaging."

In corporate news, Standard Chartered lost ground as it reported a 28% rise in adjusted full-year pre-tax profit to $3.86bn, which missed consensus expectations of just under $4bn as income growth was at the lower end of guidance. The emerging markets-focused bank also updated its strategic priorities, aiming for a step-up in profits and dividends as it invests in tech but cuts costs.

Precious metals miner Fresnillo lost its shine as it posted a 34.7% drop in full-year pre-tax profit and warned that 2019 will be another challenging year.

Croda International fell as the chemicals company announced a £150m special dividend but a modest 1.2% increase in full-year pre-tax profit.

Babcock was under the cosh after revealing around £20m of exceptional costs linked to Brexit as it restructures its aerial emergency services businesses to comply with European operating requirements, plus £30m for new pension requirments.

Going the other way, Ocado was the standout gainer as it and Marks & Spencer confirmed they are in discussions about a joint venture in UK retail. M&S also enjoyed solid gains.

Persimmon advanced as the housebuilder said profits topped £1bn last year, a day after its shares slumped on a report that it may be stripped of its right to participate in the government's Help to Buy scheme. The FTSE 100 group also said it had appointed Dave Jenkinson as group chief executive on a permanent basis after previous boss Jeff Fairburn left last year in the wake of the furore over his £75m bonus.

Builders' merchant Travis Perkins saw its shares surge as full-year profit topped expectations thanks in part to cost-cutting.

In broker note action, BT was cut to 'hold' at Berenberg, while Hunting, Wood Group and Petrofac were started at 'hold'. Centrica was downgraded to 'hold' at Kepler Cheuvreux.

IG Group was initiated at 'outperform' by RBC Capital Markets and Micro Focus was cut to 'sell' at Investec and Sainsbury was downgraded to 'add' at AlphaValue.

Market Movers

FTSE 100 (UKX) 7,151.12 -0.45%
FTSE 250 (MCX) 19,275.77 0.15%
techMARK (TASX) 3,486.31 -0.87%

FTSE 100 - Risers

Ocado Group (OCDO) 990.00p 11.71%
Taylor Wimpey (TW.) 172.00p 4.02%
Barclays (BARC) 165.14p 3.72%
GVC Holdings (GVC) 670.00p 3.55%
Next (NXT) 5,200.00p 3.46%
Wood Group (John) (WG.) 546.40p 3.37%
Marks & Spencer Group (MKS) 303.20p 3.23%
Persimmon (PSN) 2,419.00p 2.85%
easyJet (EZJ) 1,350.00p 2.70%
Barratt Developments (BDEV) 588.60p 2.69%

FTSE 100 - Fallers

Fresnillo (FRES) 896.60p -8.14%
International Consolidated Airlines Group SA (CDI) (IAG) 617.00p -4.34%
Croda International (CRDA) 4,879.00p -3.58%
BT Group (BT.A) 220.00p -3.25%
NMC Health (NMC) 2,736.00p -2.43%
Experian (EXPN) 2,011.00p -2.24%
Vodafone Group (VOD) 136.60p -2.15%
Rentokil Initial (RTO) 332.00p -1.92%
British American Tobacco (BATS) 2,840.50p -1.83%
Imperial Brands (IMB) 2,559.00p -1.58%

FTSE 250 - Risers

Travis Perkins (TPK) 1,429.00p 12.52%
Aston Martin Lagonda Global Holdings (AML) 1,348.20p 7.46%
Fisher (James) & Sons (FSJ) 1,892.00p 4.53%
Balfour Beatty (BBY) 291.80p 4.44%
Galliford Try (GFRD) 730.00p 4.36%
Grafton Group Units (GFTU) 800.00p 4.10%
Bellway (BWY) 2,977.00p 3.98%
IG Group Holdings (IGG) 571.00p 3.63%
Crest Nicholson Holdings (CRST) 391.60p 3.22%
JD Sports Fashion (JD.) 486.10p 3.12%

FTSE 250 - Fallers

Metro Bank (MTRO) 1,300.00p -15.75%
Babcock International Group (BAB) 550.00p -4.61%
Sophos Group (SOPH) 330.20p -4.29%
TI Fluid Systems (TIFS) 182.00p -3.91%
Dechra Pharmaceuticals (DPH) 2,434.00p -3.87%
Inmarsat (ISAT) 384.80p -3.53%
Acacia Mining (ACA) 226.80p -3.45%
Stobart Group Ltd. (STOB) 152.20p -3.30%
Ascential (ASCL) 366.40p -2.81%
Pantheon International (PIN) 2,120.00p -2.75%