London close: Stocks dip amid pound strength and US-China trade uncertainty

London stocks finished in the red on Tuesday as sterling gained ground and an early advance on Wall Street appeared to fizzle out.

By the end of trading, the FTSE 100 had drifted 0.08% lower to 7,089.58, while the pound was rising by 0.67% against the US dollar to 1.23008 and 0.72% firmer versus the euro at 1.1084.

"The FTSE 100 is lagging its mainland European peers today, as increased optimism over the possibility of averting a no-deal Brexit drove the pound higher," said IG's Josh Mahony.

"With a positive tone emerging from G7 talks over the weekend, the pound is rising in response to both optimism over a potential deal and a growing feeling that a no deal Brexit could be blocked even if those talks fail."

After a meeting called by Jeremy Corbyn, opposition lawmakers agreed on how they would move to block a 'no deal' Brexit without pursuing a 'no confidence' vote, the BBC reported.

More broadly, market participants were still trying to make heads or tails of the headlines around Sino-US trade relations which came out over the bank holiday.

On Monday, the US President said that "China called last night our top trade people and said let's get back to the table" and US Treasury Secretary, Steve Mnuchin, added that "there were discussions that went back and forth and let’s just leave it at that."

But according to the editor of China's state-owned Global Times, top Chinese and US negotiators had held no phone talks in recent days, although the country's vice premier, Liu He, did go on record saying that Beijing hoped to resolve the trade war through "calm" negotiations.

Meanwhile, and also over the weekend, some equity strategists appeared to sour on the outlook a tad.

So while JP Morgan's Mislav Matejka on Tuesday reiterated a call for global share prices to begin moving higher from September, on Sunday UBS Global Wealth Management's Mark Haefele reduced his allocation of stocks relative to high-grade bonds in a bid to cut exposure to trade wars and political uncertainty.

"Risks to the global economy and markets have increased, following a renewed escalation in US-China trade tensions," Haefele said.

It was the first time that the world's largest wealth manager was 'underweight' stocks since the euro area financial crisis, but the main change to his asset allocation was a reduction to emerging market stocks.

Indeed, Haefele cautioned "against large equity underweights" and repeated that the US might still avoid a recession in 2020.

In UK equity markets, plumbing supplier Ferguson fell after a downgrade to 'underperform' from 'neutral' at Bank of America-Merrill Lynch.

Distribution and outsourcing group Bunzl retreated as it posted a rise in interim profit and revenue but pointed to "continuing economic uncertainties". Some analysts also argued that the 2% hike to the dividend was disappointing.

On the upside, UAE-based healthcare operator NMC Health racked up strong gains again, having rallied last week on a report that two groups, including one backed by China's Fosun, were competing to buy a 40% stake in the company worth up to $1.9bn.

Polymetal advanced as it reported a jump in interim adjusted core earnings thanks to higher production, as its Kyzyl operation delivered at full capacity.

Outside the FTSE 350, shares of Carpetright pushed higher as the embattled floor coverings retailer said its largest shareholder, Meditor European Master Fund, will buy its £40.7m revolving credit facility from lenders NatWest and AIB.

IWG, formerly Regus, was on the front foot following reports over the weekend that the office space provider was looking to spin off its US business and list it in New York.

Market Movers

FTSE 100 (UKX) 7,089.58 -0.08%
FTSE 250 (MCX) 19,335.88 0.52%
techMARK (TASX) 3,812.74 -0.24%

FTSE 100 - Risers

NMC Health (NMC) 2,298.00p 6.54%
Standard Life Aberdeen (SLA) 250.70p 4.15%
British Land Company (BLND) 517.00p 4.11%
Land Securities Group (LAND) 784.60p 3.26%
Smurfit Kappa Group (SKG) 2,490.00p 3.23%
Ocado Group (OCDO) 1,236.00p 3.00%
TUI AG Reg Shs (DI) (TUI) 825.60p 2.71%
Reckitt Benckiser Group (RB.) 6,254.00p 2.42%
Smith (DS) (SMDS) 331.70p 2.31%
Next (NXT) 5,882.00p 2.01%

FTSE 100 - Fallers

British American Tobacco (BATS) 2,832.00p -4.36%
Just Eat (JE.) 756.00p -2.10%
Ferguson (FERG) 5,884.00p -1.67%
Standard Chartered (STAN) 606.80p -1.24%
Burberry Group (BRBY) 2,118.00p -1.22%
Pearson (PSON) 809.00p -1.10%
Prudential (PRU) 1,348.00p -1.06%
Spirax-Sarco Engineering (SPX) 7,795.00p -1.02%
AstraZeneca (AZN) 7,240.00p -1.00%
Barclays (BARC) 136.68p -0.99%

FTSE 250 - Risers

Future (FUTR) 1,170.00p 8.94%
Intu Properties (INTU) 37.77p 8.38%
Provident Financial (PFG) 411.50p 7.95%
Centamin (DI) (CEY) 149.15p 5.86%
Hochschild Mining (HOC) 218.40p 5.61%
Go-Ahead Group (GOG) 2,124.00p 5.46%
Riverstone Energy Limited (RSE) 700.00p 5.26%
AJ Bell (AJB) 390.00p 4.56%
Rank Group (RNK) 176.40p 3.64%
IWG (IWG) 421.90p 3.64%

FTSE 250 - Fallers

TI Fluid Systems (TIFS) 165.40p -7.29%
Computacenter (CCC) 1,349.00p -5.48%
Clarkson (CKN) 2,340.00p -5.26%
Renishaw (RSW) 3,390.00p -4.78%
Ted Baker (TED) 912.00p -4.10%
Ferrexpo (FXPO) 193.65p -4.04%
Playtech (PTEC) 363.90p -3.88%
Funding Circle Holdings (FCH) 112.60p -3.76%
Sanne Group (SNN) 512.00p -3.58%
Amigo Holdings (AMGO) 160.80p -3.04%