London close: Stocks drop as Sainsbury's, housebuilders retreat

London stocks fell on Thursday as the latest update from Taylor Wimpey dented the housebuilding sector, while first-quarter numbers from Barclays disappointed and Sainsbury's slumped as the competition watchdog blocked its proposed merger with Asda.

The FTSE 100 closed down 0.5% at 7,434.13, while the pound was flat against the dollar at 1.2898 and 0.2% firmer versus the euro at 1.1583.

In equity markets, housebuilders were the standout losers after Taylor Wimpey hailed a "good" start to the year despite wider macroeconomic uncertainty but said margins will be slightly lower this year due to greater build cost inflation.

The sector was also hit by a series of downgrades by broker Shore Capital, which cut its stance on Barratt Developments, Bellway, Bovis Homes, Persimmon, Redrow, Crest Nicholson and Taylor Wimpey.

Sainsbury's was under the cosh as the Competition and Markets Authority blocked its proposed merger with Asda on the grounds that it would leave shoppers worse off.

Russ Mould, investment director at AJ Bell, said: "All attention now turns to Sainsbury’s and how it will no longer be able to lean on Asda to drive earnings. Its sales have been weak and the customer experience in its stores has been getting worse.

"Sainsbury’s chief executive Mike Coupe needs to have a radical Plan B to save the business otherwise his days are numbered with the supermarket.

"Coupe was caught singing ‘We’re in the Money’ following the initial news that Sainsbury’s planned to merge with Asda. Today you’re more likely to hear Bonnie Tyler blasting down the aisles of Sainsbury’s supermarkets. Coupe is holding out for a hero: they’ve got to be strong and they’ve got to be fast otherwise Sainsbury’s problems will just get worse."

Barclays was also in the red after it posted a 10% drop in first-quarter profit amid tougher times for its corporate and investment bank division, and said it might have to cut costs further to meet returns targets.

RBS was weaker as chief executive Ross McEwan resigned after five and a half years in the role and ahead of its first-quarter numbers on Friday.

British American Tobacco and Imperial Brands lost ground as shares in US tobacco maker Altria fell after its first-quarter numbers missed analysts' expectations on the top and bottom lines.

Ex-dividends also weighed on London's equity markets, with Legal & General, William Hill, Glencore, Antofagasta, Wood Group, Informa, Rolls-Royce, Spirax-Sarco, Weir, Greggs, Petrofac, IWG and Fresnillo all in the frame.

On the upside, paper and packaging groups DS Smith and Mondi gained after well-received results from US peer International Paper, whose first-quarter profit beat expectations.

Elsewhere, bus and rail operator Stagecoach surged to the top of the FTSE 250 as it announced plans to buy back up to £60m shares.

With so much happening on the corporate front, the release of better-than-expected figures from the Confederation of British Industry - which showed retail sales rose for the first time in five months in April - had little impact.

The balance of retailers reporting year-on-year growth in sales volumes came in at +13 from -18 in March, when it suffered its biggest drop in 17 months. Analysts had been expecting a reading of zero.

CBI chief economist Rain Newton-Smith said: "It’s encouraging to see retailers with more of a spring in their step than in recent months. The recent pick up in real wages is a welcome support to the sector, making the pound in people’s pockets stretch that bit further.

"However, this month’s sales growth will have been distorted by the later timing of Easter, and falling sales in clothing and department stores underline how challenging underlying conditions remain.

"The Brexit extension means an economic crisis has been avoided, for now. However, uncertainty continues to drag on consumer confidence, and many retailers report an impact on their sales. Politicians now owe it to the country - its businesses and people - to come together in a total spirit of compromise, setting aside all party political lines, and agree a way forward to avoid a no deal Brexit."

Market Movers

FTSE 100 (UKX) 7,434.13 -0.50%
FTSE 250 (MCX) 19,871.05 -0.61%
techMARK (TASX) 3,582.45 -0.13%

FTSE 100 - Risers

Smith (DS) (SMDS) 365.40p 1.56%
Reckitt Benckiser Group (RB.) 6,124.00p 1.31%
United Utilities Group (UU.) 847.00p 1.15%
London Stock Exchange Group (LSE) 5,040.00p 1.10%
Carnival (CCL) 4,041.00p 1.02%
Just Eat (JE.) 748.60p 1.00%
Kingfisher (KGF) 265.20p 0.99%
GlaxoSmithKline (GSK) 1,555.20p 0.96%
Auto Trader Group (AUTO) 575.20p 0.95%
Mondi (MNDI) 1,711.50p 0.94%

FTSE 100 - Fallers

Taylor Wimpey (TW.) 181.95p -5.36%
Legal & General Group (LGEN) 274.50p -4.94%
Sainsbury (J) (SBRY) 216.00p -4.68%
Glencore (GLEN) 321.65p -3.77%
Barclays (BARC) 160.40p -3.59%
Micro Focus International (MCRO) 1,917.50p -3.30%
Antofagasta (ANTO) 930.40p -2.90%
Persimmon (PSN) 2,270.00p -2.62%
Royal Bank of Scotland Group (RBS) 249.80p -2.61%
Barratt Developments (BDEV) 602.60p -2.37%

FTSE 250 - Risers

Stagecoach Group (SGC) 121.70p 5.37%
Sirius Minerals (SXX) 21.90p 4.39%
TBC Bank Group (TBCG) 1,590.00p 4.33%
FDM Group (Holdings) (FDM) 994.00p 3.11%
Contour Global (GLO) 210.00p 2.92%
Meggitt (MGGT) 535.40p 2.14%
Sanne Group (SNN) 608.00p 2.01%
Bank of Georgia Group (BGEO) 1,662.00p 1.90%
Domino's Pizza Group (DOM) 265.40p 1.72%
Rank Group (RNK) 160.00p 1.65%

FTSE 250 - Fallers

Funding Circle Holdings (FCH) 242.50p -13.39%
Acacia Mining (ACA) 148.10p -8.02%
Indivior (INDV) 40.49p -5.84%
William Hill (WMH) 159.65p -5.64%
Essentra (ESNT) 421.20p -4.71%
Just Group (JUST) 69.00p -4.17%
Saga (SAGA) 58.40p -4.11%
Petrofac Ltd. (PFC) 471.00p -3.67%
Hunting (HTG) 628.00p -3.61%
Crest Nicholson Holdings (CRST) 387.00p -3.39%