London midday: Stocks fall further as trade, Brexit woes weigh

London stocks had extended losses by midday on Thursday amid growing concerns about Brexit and Sino-US trade relations.

The FTSE 100 was 1.4% lower at 7,231.63, while the pound was dented by worries about a possible no-deal Brexit, trading at its worst level against the dollar since the start of January, down 0.4% at 1.2691, and 0.3% weaker versus the euro at 1.1322.

The trade spat between the US and China intensified after China's Commerce Ministry said that talks between the two nations can't continue unless the US addresses its "wrong actions".

According to a CNBC translation, Ministry of Commerce spokesperson Gao Feng said earlier: "If the U.S. would like to keep on negotiating it should, with sincerity, adjust its wrong actions. Only then can talks continue."

This comes as Panasonic became the latest company to stop doing business with Huawei in order to comply with US restrictions.

Spreadex analyst Connor Campbell said: "Whatever relief was generated by the announcement a 90-day grace period earlier in the week has completely dissipated, as investors fret over the damage this nascent tech Cold War is doing to the chance of a positive outcome to the US-China trade battle."

On home shores, Britons were heading to the polls for the European elections amid growing pressure for Prime Minister Theresa May to step down after she failed to garner support for her tweaked Brexit deal and following the resignation of Commons leader Andrea Leadsom.

XTB market analyst David Cheetham said: "A surge in populist anti-EU MEPs would change the dynamic for future Brexit negotiations and likely serve to further increase the risk of a no-deal that is already looking more probable with May’s successor expected to be more open to leaving in this manner."

The chair of the powerful 1922 committee of Conservative MPs said earlier that he expected Theresa May on Friday to give him a timetable for her departure as PM or party rules would be amended to allow a no-confidence vote.

As if there wasn't enough to be fretting about, disappointing eurozone PMIs for the month of May added to the downbeat tone.

Economic activity in the currency area was little changed at 51.6 compared with 51.5 a month earlier, according to the IHS Markit purchasing managers' index. A figure above 50 shows activity growing.

Meanwhile, services activity was at a four-month low of 52.5, down from 52.8 the month before, while manufacturing output contracted for the fourth month running, registering a score of 49.

In equity markets, ex-dividends were a drag, with Wm Morrison, Bunzl, Brewin Dolphin, DCC, Diploma, Euromoney, Hill and Smith, Howden Joinery, Marston's, Provident Financial, Spectris, Tritax Big Box, Bellway and Countryside Properties all in the frame.

Royal Mail suffered heavy losses, a day after the company said it was cutting its dividend by 10p to 15p from next year to help fund the next phase of its turnaround process.

Babcock was under the cosh for the second day in a row following its results on Wednesday, as Stifel downgraded its stance on the stock to ‘hold’.

On the upside, Serco surged as the outsourcer announced the acquisition of Alion’s Naval Systems Business Unit (NSBU), which supplies ship and submarine engineering services to the US Navy, for $225m.

Defence technology company Qinetiq rallied as its full-year underlying pre-tax profit of £124m came in ahead of expectations of £115.1m.

Mitchells & Butlers advanced as a snow-free winter helped the pub and restaurant operator post a return to profit growth in the first half, although it did warn of “limited visibility” ahead due to Brexit uncertainty.

Merlin Entertainments was in the green as the Madame Tussauds owner rejected a call by one of its biggest shareholders to find a buyer to take it private.

Market Movers

FTSE 100 (UKX) 7,231.63 -1.40%
FTSE 250 (MCX) 19,045.44 -1.36%
techMARK (TASX) 3,519.86 -0.71%

FTSE 100 - Risers

Evraz (EVR) 599.00p 1.63%
AstraZeneca (AZN) 6,024.00p 1.45%
NMC Health (NMC) 2,493.00p 0.81%
GlaxoSmithKline (GSK) 1,577.60p 0.41%
Paddy Power Betfair (PPB) 5,770.00p 0.35%
Compass Group (CPG) 1,811.89p -0.01%
Fresnillo (FRES) 728.20p -0.05%
Hikma Pharmaceuticals (HIK) 1,742.00p -0.09%
HSBC Holdings (HSBA) 656.59p -0.14%
Whitbread (WTB) 4,533.00p -0.26%

FTSE 100 - Fallers

Morrison (Wm) Supermarkets (MRW) 196.93p -5.95%
Melrose Industries (MRO) 164.45p -5.79%
TUI AG Reg Shs (DI) (TUI) 739.60p -5.20%
Smurfit Kappa Group (SKG) 2,191.00p -4.95%
Ferguson (FERG) 5,192.00p -3.85%
Ashtead Group (AHT) 1,965.00p -3.68%
Rolls-Royce Holdings (RR.) 890.00p -3.20%
Antofagasta (ANTO) 786.84p -3.12%
DCC (DCC) 6,830.00p -3.09%
Marks & Spencer Group (MKS) 238.90p -2.81%

FTSE 250 - Risers

Serco Group (SRP) 132.10p 9.08%
Mitchells & Butlers (MAB) 260.50p 7.42%
Merlin Entertainments (MERL) 353.16p 6.21%
QinetiQ Group (QQ.) 308.00p 3.77%
Indivior (INDV) 48.49p 3.48%
Pets at Home Group (PETS) 173.90p 3.20%
Inchcape (INCH) 570.00p 2.24%
IG Group Holdings (IGG) 545.80p 2.17%
Bakkavor Group (BAKK) 124.20p 1.97%
Ibstock (IBST) 250.80p 1.87%

FTSE 250 - Fallers

Royal Mail (RMG) 201.70p -9.14%
Premier Oil (PMO) 87.80p -7.50%
Amigo Holdings (AMGO) 206.50p -6.56%
Tullow Oil (TLW) 213.90p -5.27%
Babcock International Group (BAB) 436.40p -5.13%
AJ Bell (AJB) 409.60p -4.97%
Tate & Lyle (TATE) 756.80p -4.44%
Stobart Group Ltd. (STOB) 108.15p -4.29%
B&M European Value Retail S.A. (DI) (BME) 363.90p -4.24%
Syncona Limited NPV (SYNC) 239.86p -4.06%