London close: Stocks dip amid simmering US-China trade tensions

London stocks finished in the red on Wednesday amid renewed worries about trade relations between the US and China and with sterling having traded higher throughout most of the session.

The FTSE 100 was down 0.42% at 7,367.62, while the pound was trading down by 0.22% at 1.2695 against the greenback and 0.1% weaker versus the euro at 1.1220. Earlier, the currency was lifted by comments from blond bombshell and Tory leadership frontrunner Boris Johnson, who said earlier that he is not aiming for a no-deal Brexit.

Neil Wilson, chief market analyst at Markets.com, said: "These warm words calmed some nerves that have been on edge on fears he may strike a more Raab-like hawkishness over Brexit.

"It’s of course all fairly meaningless electioneering that will have very limited impact on the real outcome - the EU says it won’t renegotiate, whilst Parliament won’t allow a no-deal Brexit. But with Boris the favourite to become the next PM, the market is listening to what he says, producing some gyrations in sterling crosses."

Nonetheless, after the close of trading in London, news broke that MPs had voted by 309 to 298 against a Labour motion to take control of Parliament's agenda on 25 June to make time to pass for laws that would block any attempt at leaving the European Union without a deal.

The downbeat tone in equity markets came after US President Trump said on Tuesday that he was personally holding up a trade deal with China and that he won’t finalise an agreement unless Beijing returns to terms negotiated earlier in the year. Meanwhile, China said it was ready to respond if Washington escalates trade tensions further.

Spreadex analyst Connor Campbell said that while Trump's "comment sat at the less aggressive end of the trade rhetoric spectrum, it was still enough to cast a smidge of doubt on the market’s recent rebound."

Investors were also digesting the latest data out of China, which showed that consumer price inflation rose to a 15-month high of 2.7% in May from a year ago as food prices spiked on the back of high pork prices, although at the core level price increases slowed. The data was in line with economists' expectations.

It was a similar story in the States, with both headline and core consumer prices surprising to the downside in May, but analysts divided on the outlook for inflation ahead of the US central bank's policy decision scheduled for the following week.

According to the US Department of Labor, the year-on-year rate of increase in headline consumer prices slipped from 2.0% in April to 1.8% for May (consensus: 1.9%).

At the core level meanwhile, which excludes food and energy, CPI was up by 0.1% versus April and up 2.0% on a year ago (consensus: 2.1%) - its lowest reading for 15 months - following a print of 2.1% for April.

In equity markets, British American Tobacco was the worst performer on the top-flight index even as it reaffirmed full-year expectations with constant currency revenue growth in the mid-upper half of long-term guidance range of 3-5%.

IG market analyst Chris Beauchamp said: "British American Tobacco had rallied hard into today’s trading update, so the ‘steady as she goes’ message was unlikely to inspire short-term traders to hold on to their positions. Having declared that the second half will see new products come to the rescue, the firm has set a very high bar for itself, which might come back to haunt them in due course."

Shares in guarantor loans lender Amigo Holdings slumped after the company's biggest shareholder, Richmond Group, said it was mulling the sale of some of its stock. The venture capital firm said in a statement that it had been "investigating" a potential sale of part of its shareholding of about 61.4% in a placement, but has decided not to proceed with a sale right now. However, the group said it "continues to actively consider selling some shares in Amigo".

Auto Trader was under pressure on the back a downgrade to 'sell' from 'neutral' at UBS, while over-50s specialist Saga retreated after it announced the retirement of chief executive officer Lance Batchelor after six years at the company. Saga shares had risen sharply on Tuesday after it announced a savings partnership with Goldman Sachs' savings arm, Marcus.

In other broker note action, Metro Bank was boosted by an upgrade to 'neutral' at Macquarie, while Petrofac was lifted to 'neutral' at Redburn and Antofagasta was bumped up to 'hold' at Liberum.

Market Movers

FTSE 100 (UKX) 7,367.62 -0.42%
FTSE 250 (MCX) 19,250.06 -0.39%
techMARK (TASX) 3,605.27 0.14%

FTSE 100 - Risers

Reckitt Benckiser Group (RB.) 6,675.00p 4.38%
Ferguson (FERG) 5,310.00p 2.91%
Fresnillo (FRES) 804.80p 2.18%
Evraz (EVR) 673.00p 1.51%
Halma (HLMA) 2,004.00p 1.14%
Unilever (ULVR) 4,972.50p 1.11%
Diageo (DGE) 3,430.00p 1.05%
Severn Trent (SVT) 2,076.00p 1.02%
Sage Group (SGE) 768.60p 1.00%
AstraZeneca (AZN) 6,199.00p 0.99%

FTSE 100 - Fallers

British American Tobacco (BATS) 2,936.00p -4.40%
BP (BP.) 540.80p -2.91%
CRH (CRH) 2,490.00p -2.77%
Standard Chartered (STAN) 683.00p -2.54%
Auto Trader Group (AUTO) 591.60p -2.38%
Centrica (CNA) 91.78p -2.32%
Smurfit Kappa Group (SKG) 2,279.00p -2.15%
Burberry Group (BRBY) 1,773.50p -1.88%
Imperial Brands (IMB) 2,023.50p -1.65%
International Consolidated Airlines Group SA (CDI) (IAG) 459.30p -1.65%

FTSE 250 - Risers

Kier Group (KIE) 182.00p 8.14%
Hochschild Mining (HOC) 176.30p 5.19%
Funding Circle Holdings (FCH) 244.00p 4.05%
Centamin (DI) (CEY) 103.35p 3.72%
Rathbone Brothers (RAT) 2,175.00p 3.08%
Acacia Mining (ACA) 169.70p 2.85%
Entertainment One Limited (ETO) 385.80p 2.83%
Games Workshop Group (GAW) 5,085.00p 2.81%
Stobart Group Ltd. (STOB) 109.40p 2.63%
Just Group (JUST) 50.45p 2.33%

FTSE 250 - Fallers

Premier Oil (PMO) 70.00p -6.64%
Provident Financial (PFG) 467.30p -6.61%
Tullow Oil (TLW) 194.70p -5.53%
Amigo Holdings (AMGO) 276.00p -5.48%
Saga (SAGA) 38.14p -4.70%
Wood Group (John) (WG.) 391.00p -4.45%
Woodford Patient Capital Trust (WPCT) 61.20p -3.94%
Fisher (James) & Sons (FSJ) 1,920.00p -3.90%
Cairn Energy (CNE) 143.10p -3.57%
Vivo Energy (VVO) 132.80p -3.07%