London midday: Stocks wallow as pound surges; Ocado flies on M&S tie-up

London stocks were still firmly in the red by midday on Tuesday, dragged lower by a stronger pound as investors grew increasingly hopeful that a 'no deal' Brexit can be avoided.

The FTSE 100 was down 1.2% to 7,094.31 as sterling hit four- and 21-month highs against the dollar and the euro, respectively, as the Labour Party leant towards backing a second referendum and Prime Minister Theresa May opened the door to an extension of Article 50.

The pound was up 0.7% against the dollar and the euro at 1.3191 and 1.1610, respectively. A stronger pound tends to dent the top-flight index as around 70% of its constituents derive most of their earnings from overseas.

Chris Beauchamp, chief market analyst at IG, said: "No deal seems, finally, to have been pushed off the table, and while we can debate the merits of this for the UK’s negotiating position, it does at least remove this huge element of uncertainty. Markets and businesses can be forgiven for breathing a sigh of relief this morning.

"Now the battle moves on to whether the PM can round up enough support for her deal for another try on 12 March. She could have reason for optimism, since some in the ERG might shift position for fear of losing Brexit altogether, while some Labour MPs from Leave constituencies will worry about their seats now that Labour has, in Corbyn’s usual roundabout way, moved to backing a second referendum."

On the data front, the latest figures from UK Finance showed mortgage approvals rose 1.5% year-on-year in January, while mortgage re-approvals were down 3.1%, giving an overall rise of 0.3%.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "January’s data indicate that mortgage lending is holding up much better than surveys of house buyer demand have suggested.

"We’re reluctant to conclude, however, that housing market activity is on a sustainable recovery path. The new buyer enquiries balance of the RICS Residential Market Survey fell to its lowest level since June 2008 in January; the balance usually is a great guide to the lending data. The sharp downturn in lending in 2016 also demonstrates that Brexit uncertainty can be very damaging."

In corporate news, Standard Chartered lost ground as it reported a 28% rise in adjusted full-year pre-tax profit to $3.86bn, which missed consensus expectations of just under $4bn as income growth was at the lower end of guidance. The emerging markets-focused bank also updated its strategic priorities, aiming for a step-up in profits and dividends as it invests in tech but cuts costs.

Precious metals miner Fresnillo lost its shine as it posted a 34.7% drop in full-year pre-tax profit and warned that 2019 will be another challenging year.

Croda International fell as the chemicals company announced a £150m special dividend but a modest 1.2% increase in full-year pre-tax profit.

Babcock was under the cosh after saying Brexit would result in a one-off tax cost of £10m as it restructures its aerial emergency services businesses to comply with European operating requirements.

Going the other way, Ocado was the standout gainer as it and Marks & Spencer confirmed they are in discussions about a joint venture in UK retail. M&S also enjoyed solid gains.

Persimmon advanced as the housebuilder said profits topped £1bn last year, a day after its shares slumped on a report that it may be stripped of its right to participate in the government's Help to Buy scheme. The FTSE 100 group also said it had appointed Dave Jenkinson as group chief executive on a permanent basis after previous boss Jeff Fairburn left last year in the wake of the furore over his £75m bonus.

Peers Taylor Wimpey, Barratt Developments and Berkeley Group all racked up healthy gains.

Builders' merchant Travis Perkins saw its shares surge as full-year profit topped expectations thanks in part to cost-cutting.

In broker note action, BT was cut to 'hold' at Berenberg, while Hunting, Wood Group and Petrofac were started at 'hold'. Centrica was downgraded to 'hold' at Kepler Cheuvreux.

IG Group was initiated at 'outperform' by RBC Capital Markets and Micro Focus was cut to 'sell' at Investec and Sainsbury was downgraded to 'add' at AlphaValue.

Market Movers

FTSE 100 (UKX) 7,094.31 -1.24%
FTSE 250 (MCX) 19,296.43 0.26%
techMARK (TASX) 3,480.39 -1.03%

FTSE 100 - Risers

Ocado Group (OCDO) 980.00p 10.58%
Taylor Wimpey (TW.) 171.45p 3.69%
Next (NXT) 5,208.00p 3.62%
Marks & Spencer Group (MKS) 304.20p 3.58%
Persimmon (PSN) 2,433.00p 3.44%
Kingfisher (KGF) 247.10p 3.39%
GVC Holdings (GVC) 668.50p 3.32%
easyJet (EZJ) 1,358.02p 3.31%
Barratt Developments (BDEV) 588.80p 2.72%
Barclays (BARC) 162.51p 2.07%

FTSE 100 - Fallers

Fresnillo (FRES) 894.80p -8.32%
Croda International (CRDA) 4,876.00p -3.64%
International Consolidated Airlines Group SA (CDI) (IAG) 623.00p -3.41%
British American Tobacco (BATS) 2,803.00p -3.13%
BT Group (BT.A) 221.00p -2.81%
Experian (EXPN) 2,002.00p -2.67%
Smurfit Kappa Group (SKG) 2,220.00p -2.63%
Vodafone Group (VOD) 136.00p -2.58%
Burberry Group (BRBY) 1,928.00p -2.43%
NMC Health (NMC) 2,738.00p -2.35%

FTSE 250 - Risers

Travis Perkins (TPK) 1,443.50p 13.66%
Fisher (James) & Sons (FSJ) 1,930.00p 6.63%
Grafton Group Units (GFTU) 807.50p 5.07%
Aston Martin Lagonda Global Holdings (AML) 1,317.40p 5.01%
Plus500 Ltd (DI) (PLUS) 804.00p 4.42%
Bellway (BWY) 2,967.00p 3.63%
Howden Joinery Group (HWDN) 529.20p 3.36%
Crest Nicholson Holdings (CRST) 392.00p 3.32%
Provident Financial (PFG) 629.40p 3.18%
Bovis Homes Group (BVS) 1,044.00p 3.11%

FTSE 250 - Fallers

Babcock International Group (BAB) 548.20p -4.93%
Inmarsat (ISAT) 383.20p -3.94%
Dechra Pharmaceuticals (DPH) 2,456.00p -3.00%
Mediclinic International (MDC) 315.70p -2.89%
Pantheon International (PIN) 2,120.00p -2.75%
Metro Bank (MTRO) 1,502.00p -2.66%
Tate & Lyle (TATE) 702.20p -2.28%
Kaz Minerals (KAZ) 664.80p -2.24%
Contour Global (GLO) 170.40p -2.07%
Genus (GNS) 2,236.00p -1.93%