London midday: Stocks and sterling drop as Brexit, China woes weigh

London stocks were still in the red by midday on Friday following the release of weak Chinese data and after Theresa May returned home from her EU charm offensive empty-handed.

The FTSE 100 was down 0.8% to 6,820.77, while the pound was off 0.6% against the dollar at 1.2574 and 0.1% lower versus the euro at 1.1132 after European Union leaders rejected May’s plea to put a time limit on the Irish backstop, in a blow to her hopes of reaching a deal at a Brussels summit on Thursday.

May had arrived at the European Council meeting hoping to win changes on the contentious backstop, designed to stop a hard border with Ireland in the event of no-deal with the EU, and bring back a deal she get could get through parliament.

But her attempts were opposed by Ireland, France, Sweden, Spain and Belgium, who voiced doubts that the prime minister would be able to sell the technical concession to hostile MPs in Westminster.

IG market analyst analyst Joshua Mahony said: "The pound is in sharp decline as any optimism surrounding Theresa May’s victory in her no confidence vote evaporated to reveal the same problems that underpinned the need to question support in her leadership to begin with. The EU is unwilling to budge in any meaningful way, which largely means that the current plan on the table is doomed for failure. The Prime Minister appears to be willing to drag this on until the last minute, proposing the bill as the best available option in the face of a no-deal Brexit.

"However, a failure to pass this bill will likely lead us into limbo where there is insufficient support in parliament to pass any one form of Brexit."

Disappointing Chinese data added to the gloomy mood, with industrial production up 5.4% on the year in November, versus expectations of 5.9% growth. Meanwhile, retail sales were up 8.1%, falling short of expectations for 8.8% growth and marking the weakest pace of growth since 2003.

Russ Mould, investment director at AJ Bell, said: "There is some concern that the impact of the US/China trade war has yet to be properly felt, suggesting that China’s economic data could be in for more shocks in early 2019 unless the countries secure a permanent truce."

There was some good news to be had, however, as China confirmed that it will temporarily halt its additional 25% on US vehicles. According to a release on the Chinese finance ministry’s website, China will suspend 25% tariffs on 144 vehicles and auto parts from the US and 5% on an additional 67 auto items.

The temporary halt - which was part of an agreed truce between the US and China - will kick off on 1 January for three months.

"This is a positive development no doubt, but while the US-China trade tensions are thawing slightly, they still remain frosty and are in danger of freezing back over all together at a moment’s notice," said XTB chief market analyst David Cheetham.

Miners - which are heavily dependent on demand from China - were under pressure after the retail sales and industrial output data, with Glencore, BHP and Antofagasta all lower.

Housebuilders also retreated amid worries about Brexit, with Persimmon, Taylor Wimpey and Bellway all under the cosh.

In individual corporate news, British American Tobacco was in the red as it announced two new management board roles, in a bid to accelerate the implementation of its strategy, with a director of new categories to report directly to the chief marketing officer.

Balfour Beatty rallied as it said its performance for the year will be above previous expectations after sales of its interests in two infrastructure projects exceed directors' valuations. The FTSE 250 construction group said it was on track to achieve industry-standard margins in all earnings-based businesses in the second half of 2018.

GVC, Paddy Power Betfair and 888 were all on the rise ahead of next week’s parliamentary vote on legislation regarding fixed-odds betting terminals.

Market Movers

FTSE 100 (UKX) 6,820.77 -0.82%
FTSE 250 (MCX) 17,651.82 -0.94%
techMARK (TASX) 3,348.08 -0.43%

FTSE 100 - Risers

GVC Holdings (GVC) 720.50p 8.92%
Paddy Power Betfair (PPB) 6,560.00p 2.10%
Pearson (PSON) 948.40p 1.48%
Rentokil Initial (RTO) 333.60p 0.94%
Ocado Group (OCDO) 810.60p 0.77%
Admiral Group (ADM) 1,976.50p 0.41%
AstraZeneca (AZN) 6,122.00p 0.33%
Compass Group (CPG) 1,690.00p 0.33%
Diageo (DGE) 2,853.00p 0.28%
Relx plc (REL) 1,624.50p 0.28%

FTSE 100 - Fallers

TUI AG Reg Shs (DI) (TUI) 1,144.00p -3.87%
Royal Mail (RMG) 290.46p -3.79%
Tesco (TSCO) 192.10p -3.27%
Glencore (GLEN) 286.10p -3.07%
Evraz (EVR) 469.20p -2.92%
Micro Focus International (MCRO) 1,446.50p -2.76%
Persimmon (PSN) 1,896.50p -2.72%
Mondi (MNDI) 1,589.00p -2.66%
Smith (DS) (SMDS) 306.60p -2.60%
Taylor Wimpey (TW.) 131.75p -2.55%

FTSE 250 - Risers

Indivior (INDV) 94.80p 6.54%
Balfour Beatty (BBY) 257.10p 4.47%
888 Holdings (888) 166.70p 4.19%
Hikma Pharmaceuticals (HIK) 1,834.50p 2.69%
RHI Magnesita N.V. (DI) (RHIM) 3,650.00p 2.24%
Vivo Energy (VVO) 117.00p 2.18%
Ferrexpo (FXPO) 191.35p 2.16%
Ultra Electronics Holdings (ULE) 1,317.00p 1.54%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 345.00p 1.47%
William Hill (WMH) 158.90p 1.31%

FTSE 250 - Fallers

CYBG (CYBG) 182.20p -4.31%
Capita (CPI) 109.70p -4.19%
Kaz Minerals (KAZ) 525.20p -4.09%
G4S (GFS) 188.00p -3.98%
Inmarsat (ISAT) 406.50p -3.92%
Thomas Cook Group (TCG) 28.88p -3.73%
Weir Group (WEIR) 1,375.00p -3.47%
Dixons Carphone (DC.) 140.20p -3.34%
Moneysupermarket.com Group (MONY) 281.70p -3.30%
Bellway (BWY) 2,486.00p -3.16%