London close: Shares hammered by rising pound, trade and political frictions

London stocks fell sharply at the start of the week as the pound rallied on the back of a draft Brexit deal, with traders also looking ahead to a week that included monetary policy meetings at the US Federal Reserve and the Bank of England.

Adding to the negative sentiment was heavy selling pressure in iron ore futures against a backdrop of simmering tensions on the international trade and US political fronts.

Against that backdrop, the top tier index finished down 1.69% to 7,042.93, as the pound climbed 0.71% versus the dollar to 1.4045 and 0.28% against the euro to 1.1379 after Britain and the European Union agreed a 21-month Brexit transition deal, though the Irish border was among several issues not yet resolved.

The two sides have agreed a draft legal text for a transition deal once Britain splits from the bloc in March 2019, with Britain continuing to operate under all single market rules and judgments from the European Court of Justice until the end of 2020, while having no further say in future EU decisions. Brexit Secretary David Davis and chief EU negotiator Michel Barnier announced the agreement in Brussels on Monday morning.

Significantly, the UK would be able to ink trade deals during that time and EU nationals arriving in Britain during the transition will get same rights as before.

As the pound rallied, the top-flight index extended losses as around 70% of its constituents are highly sensitive to currency swings because they deriving most of their earnings from overseas.

The FTSE 250 on the other hand only gave back 0.56% to close at 19,694.77.

In the background, a meeting of G-20 finance ministers was kicking off down in Argentina, with trade tariffs expected to be the main topic of conversation after the European Union released details of counter-measures to US President Trump's steel and aluminium tariffs.

Meanwhile the Fed rate announcement was due on Wednesday. A rate announcement was also due from the Bank of England on Thursday, along with retail sales data and the latest BoE minutes.

Adding to the negative tone in markets, Chinese iron ore futures retreated after official figures revealed that new home prices in the Asian giant rose in only 44 cities during the month of February, down from 52 in January.

On the political front, speculation was heavy at the weekend that the White House might be eyeing firing special counsel Robert Mueller who was conducting a probe into possible collusion between the Trump campaign team and Russia.

Investors were also digesting house price data back home, with the latest figures from Rightmove showing that average asking prices paid by first- and second-time buyers in Britain hit records levels this month, although prices in the capital fell.

Prices paid by first- and second-time buyers rose to £189,840 and £272,031, respectively, while overall, house prices were up 1.5% on the month in March and 2.1% on the year.

It was a different picture in London, however, where prices were up 0.6% on the month but down 0.6% on the year, with the annual rate in negative territory for the seventh consecutive month.

On the corporate front, bookmakers were in focus as the Gambling Commission recommended that the maximum stake for fixed odds betting terminals be cut to £30 or less. It said the maximum stake on slot games such a fruit machines should be £2. As it stands, people can bet up to £100 every 20 seconds on electronic casino games.

William Hill, Ladbrokes Coral and Paddy Power Betfair all rallied on the news, as many had feared a bigger cut to as little as £2.

Neil Wilson, senior market analyst at ETX Capital, said: "This should be a relief for the sector as the worst-case scenario looks to have been avoided. Ministers will now have to justify a cut below £30 on grounds of significant risk of harm.

"With the non-slots versions of the B2 machines (roulette etc) far more popular and producing the bulk of revenues for bookies from these machines, this is undoubtedly a positive outcome for bookmakers overall. Although the market had decided a £2 flat cap was looking less likely, the fact the Gambling Commission has left ministers with an easy out for a £30 is perhaps even better than hoped for."

Shares in Micro Focus erased nearly half their value as the company cut its guidance for profits less than six months after completing the huge acquisition of HP's software arm. Chief executive Chris Hsu also resigned "to spend more time with his family".

On the upside, Hammerson surged as it confirmed that it had recently rejected a £5bn bid from French shopping centre operator Klepierre. British Land and Land Securities also gained ground on the news.

Barclays was on the front foot as it emerged that activist investor Sherborne Investors has acquired 5.2% of the voting rights in the bank.

Elsewhere, the GKN/Melrose saga continued as Dana Inc, which has agreed to merge with GKN's Driveline business, said the new combined business will hold a standard listing on the London Stock Exchange, in addition to being listed on the New York Stock Exchange. It also said the combined group would create a US and UK-led global leader in vehicle drive systems and electric propulsion, that was well-suited to address the long-term demands of global customers, expecting to deliver $235m (£170m) in synergies.

Meanwhile, Melrose said that its final offer of 466p in value today and 60% of future value creation, was “clearly superior” to the “hasty break-up” being pursued by the GKN board. GKN was in the black while Melrose retreated.

In broker note action, AstraZeneca was upgraded to 'buy' at Jefferies, while Rotork was lifted to 'buy' at Peel Hunt. Greene King was upgraded by Morgan Stanley but Close Brothers was cut to 'hold' by Berenberg.

Market Movers

FTSE 100 (UKX) 7,042.93 -1.69%
FTSE 250 (MCX) 19,694.77 -0.56%
techMARK (TASX) 3,242.42 -2.81%

FTSE 100 - Risers

Barclays (BARC) 217.00p 3.58%
Land Securities Group (LAND) 936.80p 3.31%
British Land Company (BLND) 648.00p 2.53%
SEGRO (SGRO) 620.00p 1.71%
Royal Mail (RMG) 524.20p 1.59%
Berkeley Group Holdings (The) (BKG) 3,771.00p 1.56%
Carnival (CCL) 4,735.00p 0.79%
easyJet (EZJ) 1,670.00p 0.69%
Croda International (CRDA) 4,576.00p 0.62%
Taylor Wimpey (TW.) 185.05p 0.49%

FTSE 100 - Fallers

Micro Focus International (MCRO) 1,011.00p -46.35%
Glencore (GLEN) 369.25p -4.22%
Anglo American (AAL) 1,693.00p -4.20%
Rentokil Initial (RTO) 264.90p -4.20%
Shire Plc (SHP) 3,081.50p -3.87%
Mediclinic International (MDC) 579.20p -3.79%
BHP Billiton (BLT) 1,388.60p -3.78%
British American Tobacco (BATS) 4,030.00p -3.67%
Rio Tinto (RIO) 3,611.50p -3.31%
BP (BP.) 459.75p -2.96%

FTSE 250 - Risers

Bakkavor Group (BAKK) 192.00p 7.26%
Fenner (FENR) 490.60p 5.14%
William Hill (WMH) 334.00p 4.21%
Intu Properties (INTU) 210.50p 3.19%
Workspace Group (WKP) 999.00p 2.99%
Ladbrokes Coral Group (LCL) 175.35p 2.87%
Go-Ahead Group (GOG) 1,673.00p 2.70%
Capital & Counties Properties (CAPC) 272.10p 2.68%
Safestore Holdings (SAFE) 526.50p 2.34%
Derwent London (DLN) 3,107.00p 1.74%

FTSE 250 - Fallers

Sophos Group (SOPH) 459.00p -7.72%
TI Fluid Systems (TIFS) 252.00p -6.02%
Investec (INVP) 568.60p -4.79%
Ferrexpo (FXPO) 299.50p -4.31%
Purecircle Limited (DI) (PURE) 407.00p -4.24%
Polar Capital Technology Trust (PCT) 1,134.00p -4.22%
Capita (CPI) 158.70p -4.02%
Marshalls (MSLH) 435.00p -3.80%
PZ Cussons (PZC) 224.60p -3.77%
Aggreko (AGK) 732.20p -3.71%