London close: Stocks just hold their nerve after May's Brexit speech

London stocks recovered from a mid-session lurch on Tuesday as Theresa May's statement to parliament and a speech by Bank of England governor Mark Carney combined to undermine market sentiment that had been buoyed by positive signals from across the Atlantic.

The FTSE 100, having initially risen 0.5% later fell below the waterline around lunchtime before finishing up just four points at 7,133.14. Similarly, the pound pitched into the red around the same time before finishing up 0.2% against the dollar at 1.2881 but down 0.2% lower versus the euro at 1.1378.

In a speech to MPs, the Prime Minister said she intended to keep up Brexit negotiations with Brussels over possible changes to the Irish border backstop.

To opposition leader Jeremy Corbyn's accusation that she had just offered “more excuses and more delays”, May called for MPs to “hold their nerve”.

Market analyst Chris Beauchamp at IG said: "UK-focused stocks have taken a knock this afternoon as Brexit fears resurface. Reports of the PM heading towards a ‘no deal’ have been sufficient to spook investors, and TUI’s warning about weakness comes at a time when markets are already worried about the resilience of the UK economy. ‘Holding our nerve’ appears to be the new approach to get a deal, but a great game of chicken seems to be an unpromising way to conduct global affairs."

Around the same time, Bank of England chief Mark Carney gave a gloomy speech, including a dire warning on the fallout from a trade war and the global slowdown facing the UK as it looks to leave the EU.

Earlier, trade relations between the US and China were in focus, with investors increasingly hopeful after White House Counselor Kellyanne Conway said President Trump wants to meet with Chinese President Xi Jinping "very soon" as the deadline on trade talks between the two nations looms.

Spreadex analyst Connor Campbell said this was "a slight evolution of last week’s claim that the Donald wouldn't be seeing his Chinese counterpart this side of the ceasefire ending".

Meanwhile, market sentiment also got a boost from news that Democrats and Republicans have reached an agreement in principle over border security that will avert another partial government shutdown.

On the corporate front, domestic-focused names such as Sainsbury's, Morrisons, Barrat and Persimmon were in the red.

Bookmakers GVC Holdings, Paddy Power Betfair and William Hill all rallied as it emerged that British horse racing wold resume on Wednesday following a six-day shutdown due to equine flu.

Luxury fashion brand Burberry was on the rise as fourth-quarter results from Gucci and YSL owner Kering impressed, defying worries about a slowdown in demand from China.

Equipment rental firm Ashtead advanced as JPMorgan reiterated its 'overweight' rating on the stock, saying it's an "underappreciated cash story".

Meanwhile, oil companies were providing support after OPEC-led production cuts caused oil prices to climb by more than 2%. The producers' cartel slashed production as it cut its forecast for 2019 world oil demand due to economic slowdown and expectations of faster supply growth from rivals.

Stagecoach gained as it confirmed that its subsidiary, East Midlands Trains, has agreed a new short-term rail franchise with the Department for Transport, while CYBG advanced as it said that its Clydesdale Bank chain has entered into a joint venture with Salary Finance.

Outside the FTSE 350, shares in struggling department store chain Debenhams surged as it secured a £40m cash injection from its lenders.

On the downside, Plus500 crashed 30% as it warned that 2019 profit would be "materially lower" than market expectations due to new European Union regulations on financial products. IG Group was also on the back foot.

Indivior was in the red after saying it will petition the US Supreme Court to block a decision by the Court of Appeals of the Federal Circuit to allow other companies to sell their generic versions of its anti-opioid treatment. The company said it assumes that both Dr Reddy's Laboratories and Alvogen Pine Brook will both launch their copycat versions of its Suboxone Film "at risk" of pending court judgments that they are infringing on Indivior's patents.

Tui retreated as it said losses widened in the first quarter, just days after the tour operator downgraded its full-year earnings outlook on the back of warm weather and the weak pound. Underlying losses for the group widened to €83.6m in the three months to the end of December 2018 from €36.7m in the same period a year ago, but revenue ticked up 4.4% to €3.70bn.

Shares in other travel-related stocks also suffered, with easyJet and British Airways parent IAG both lower.

In broker notes, BHP Group was cut to 'neutral' at Goldman Sachs, which also upgraded Rio Tinto to 'buy'.

Hammerson, Segro and British Land were started at 'sector perform' by RBC Capital Markets, while Greggs was cut to 'neutral' from 'buy' at UBS, along with Ashmore.

Meanwhile, HSBC initiated coverage of a host of UK mid cap stocks, including the likes of Meggitt and Auto Trader.

Market Movers

FTSE 100 (UKX) 7,137.99 0.12%
FTSE 250 (MCX) 18,816.50 -0.08%
techMARK (TASX) 3,441.21 -0.28%

FTSE 100 - Risers

NMC Health (NMC) 2,700.00p 1.89%
Kingfisher (KGF) 232.00p 1.71%
DCC (DCC) 6,620.00p 1.69%
SSE (SSE) 1,193.00p 1.62%
Smurfit Kappa Group (SKG) 2,266.00p 1.52%
Burberry Group (BRBY) 1,936.50p 1.47%
Schroders (SDR) 2,693.00p 1.32%
Unilever (ULVR) 4,255.00p 1.18%
Centrica (CNA) 138.35p 1.17%
Royal Bank of Scotland Group (RBS) 240.30p 1.05%

FTSE 100 - Fallers

TUI AG Reg Shs (DI) (TUI) 886.80p -7.45%
Sainsbury (J) (SBRY) 285.30p -2.93%
Barratt Developments (BDEV) 561.20p -2.26%
Persimmon (PSN) 2,396.00p -2.00%
Taylor Wimpey (TW.) 164.40p -1.97%
Whitbread (WTB) 4,763.00p -1.94%
easyJet (EZJ) 1,263.00p -1.86%
Morrison (Wm) Supermarkets (MRW) 239.65p -1.66%
International Consolidated Airlines Group SA (CDI) (IAG) 653.00p -1.60%
SEGRO (SGRO) 642.00p -1.56%

FTSE 250 - Risers

Premier Oil (PMO) 72.05p 4.65%
Bakkavor Group (BAKK) 146.20p 4.43%
Tullow Oil (TLW) 211.00p 3.43%
Cairn Energy (CNE) 207.20p 3.39%
Ted Baker (TED) 1,947.00p 3.34%
Superdry (SDRY) 508.50p 3.14%
Hays (HAS) 156.20p 3.10%
Weir Group (WEIR) 1,486.50p 2.66%
Hunting (HTG) 549.50p 2.61%
Card Factory (CARD) 188.80p 2.61%

FTSE 250 - Fallers

Plus500 Ltd (DI) (PLUS) 1,133.00p -30.75%
IG Group Holdings (IGG) 591.50p -4.13%
Fisher (James) & Sons (FSJ) 1,790.00p -3.24%
Contour Global (GLO) 164.80p -3.12%
CLS Holdings (CLI) 234.50p -2.90%
Millennium & Copthorne Hotels (MLC) 468.00p -2.80%
Britvic (BVIC) 886.50p -2.80%
McCarthy & Stone (MCS) 129.60p -2.70%
Unite Group (UTG) 873.50p -2.67%
Intu Properties (INTU) 116.10p -2.48%