London close: Pound strength proves too much for stocks

A bout of late selling clipped the wings of London's top flight index, with deal-making and broker upgrades failing to offset the drag from currency gains and still visibly weak investor sentiment in the States.

The FTSE 100 lost 33.25 points or 0.48% to finish at 6,888.69, having shed 3.3% during the previous week.

Another down-draft in shares of Facebook, which weighed on an initial bounce on Wall Street appeared to ripple through to European markets, accounting for the negative closes seen across the Continent and in London.

A much strengthened Sterling was another factor behind the weak start to the week, which weighs against the index's predominance of overseas earnings, with the pound up 0.71% on the dollar to 1.4222 although versus the euro it drifted lower by 0.04% to 1.1434.

News that the Labour party will table an amendment to the government's EU withdrawal bill to ensure parliament has a final say on the Brexit deal was key to the pound's rise on Monday, with little major macroeconomic data to move markets and a sparse corporate diary.

The news "is being taken well by the market,” says Jane Foley, chief currency strategist at Rabobank. "It means less chance of a hard Brexit," she said.

Commenting on the market backdrop, Michael Hewson, chief market analyst at CMC Markets UK said: "A recovery in Asian markets, after South Korea became the latest country to gain an exemption from steel and aluminium tariffs, along with comments from US Treasury Secretary Steve Mnuchin that he was cautiously optimistic that some form of agreement can be reached with China, saw European markets open higher this morning, as the widespread pessimism from last week gave way to a slight recovery in optimism early on.

"This initial buoyancy has been difficult to sustain with stocks pulling back from their highs on the back of a rising euro, as well as some concern that the recent declines could also be indicative of developing micro fissures in the economic arguments for higher stock prices, and a buoyant global growth story."

Earlier in the day, Hewson had told clients that China's initially measured response to the White House's announcement of tariffs appeared to offer "some hope" in terms of a possible stabilisation this week, but sentiment is likely to remain volatile, particularly if Chinese authorities follow up with further large scale measures which target, larger US corporations like Boeing or Apple.

In company news, Smurfit Kappa's shares were down after the Irish packaging group rejected an increased offer from US-based International Paper Company (IPC) that valued it at €37.54, saying it “fundamentally undervalues the group”. IPC offered €25.25 in cash and 0.3028 new shares of IPC common stock for each Smurfit Kappa ordinary share. Smurfit said the revised offer did not offer Smurfit Kappa shareholders “much more than compensation for the fall in International Paper’s share price since since IPC's first offer”.

BP and Shell were lifted by stronger oil prices. Brent crude hit a 52-week high on Friday and was sustaining the $70 level on Monday.

"Although fear of trade wars have been lowered a notch overnight, geopolitical tensions have risen," Rabobank noted, adding that concern that oil supply in the Middle East could be disrupted is for now overshadowing an increase in supply from the US.

GKN was slightly higher as the Thursday's deadline loomed for shareholders' decision over its potential hostile takeover by Melrose. Monday morning was mixed, with GKN receiving an increased cash offer for its Driveline business from US-based Dana, while also being forced to retract directors' statements on shareholder support, which had been quoted in Sunday newspapers. Melrose shares were down slightly.

JD Sports Fashion succumbed to late selling after it agreed a "transformational" $558m acquisition of Nasdaq-listed retailer The Finish Line in a deal that would add a 556-store estate across 44 US states.

Shire slipped on the announcement that it and biotechnology company NanoMedSyn have entered into a preclinical research collaboration to evaluate a potential enzyme replacement therapy using NanoMedSyn's proprietary synthetic derivatives named AMFA.

Car seller Inchcape's shares were revved up by news it had bought Suzuki-focused Central American dealer Grupo Rudelman for $284m ( £201m), on a cash-free and debt-free basis.

In small cap news, publication of a 95% success rate for a blood test for ovarian cancer made by UK medical technology company Angle sent its shares up 17% at one point in the session.

In broker note action, Deutsche Bank upgraded RBS to 'buy', Goldman Sachs raised Fresnillo to 'conviction buy', Randgold Resources to 'buy' and said Centamin was one of its top picks. Elsewhere, HSBC moved Smith & Nephew to 'buy' and Credit Suisse hiked its target price for Rolls Royce to to 785p but kept its 'underperform'.

Market Movers

FTSE 100 (UKX) 6,888.69 -0.48%
FTSE 250 (MCX) 19,187.09 -0.69%
techMARK (TASX) 3,140.11 -1.14%

FTSE 100 - Risers

Fresnillo (FRES) 1,263.00p 4.55%
BP (BP.) 469.55p 1.54%
Royal Bank of Scotland Group (RBS) 258.50p 1.53%
Evraz (EVR) 443.50p 1.23%
Randgold Resources Ltd. (RRS) 5,996.00p 1.08%
Barclays (BARC) 205.90p 0.76%
Rolls-Royce Holdings (RR.) 867.60p 0.74%
RSA Insurance Group (RSA) 629.20p 0.74%
Scottish Mortgage Inv Trust (SMT) 440.00p 0.73%
Legal & General Group (LGEN) 255.80p 0.63%

FTSE 100 - Fallers

Smurfit Kappa Group (SKG) 2,938.00p -4.12%
Micro Focus International (MCRO) 925.00p -3.24%
Paddy Power Betfair (PPB) 7,155.00p -2.98%
Kingfisher (KGF) 288.20p -2.86%
Standard Life Aberdeen (SLA) 357.20p -2.72%
Associated British Foods (ABF) 2,389.00p -2.33%
Next (NXT) 4,875.00p -2.19%
GlaxoSmithKline (GSK) 1,288.20p -2.08%
Imperial Brands (IMB) 2,325.00p -2.06%
Carnival (CCL) 4,494.00p -1.96%

FTSE 250 - Risers

Petrofac Ltd. (PFC) 530.00p 3.92%
Indivior (INDV) 397.40p 3.81%
Hikma Pharmaceuticals (HIK) 1,156.50p 3.21%
Cineworld Group (CINE) 230.00p 2.77%
Inchcape (INCH) 686.50p 2.23%
JPMorgan Indian Investment Trust (JII) 658.00p 2.17%
Softcat (SCT) 658.00p 1.86%
TBC Bank Group (TBCG) 1,884.00p 1.84%
Fisher (James) & Sons (FSJ) 1,578.00p 1.81%
Sanne Group (SNN) 695.00p 1.76%

FTSE 250 - Fallers

Ted Baker (TED) 2,502.00p -5.73%
BCA Marketplace (BCA) 150.20p -4.82%
JD Sports Fashion (JD.) 338.10p -4.67%
Ferrexpo (FXPO) 254.30p -4.40%
Capita (CPI) 144.70p -3.95%
Wood Group (John) (WG.) 553.20p -3.86%
Syncona Limited NPV (SYNC) 189.00p -3.68%
Pets at Home Group (PETS) 163.60p -3.25%
On The Beach Group (OTB) 521.00p -3.16%
Dunelm Group (DNLM) 513.50p -3.11%