London midday: Stocks nudge lower as Vodafone slumps on dividend concerns

London stocks had nudged a little lower by midday on Monday as Sino-US trade talks remained deadlocked, with Vodafone under pressure amid dividend concerns but overall losses capped by gains in the energy sector.

The FTSE 100 was down 0.1% 7.197.52, while the pound was up 0.2% against the dollar at 1.3022 and 0.1% firmer versus the euro at 1.1589.

As US President Trump warned in a tweet that China should not retaliate, investors were still waiting to see what counter-measures the country will announce in response to the increase in tariffs on $200bn of Chinese goods implemented by the US on Friday.

IG market analyst Joshua Mahony said: "Unfortunately for all the hope of a last-minute compromise, we are now looking at the possibility of another bout of tariffs on $300bn of Chinese goods as Trump takes aim at driving home the huge differential in trade between the two sides.

"With Trump angling for another four-year term, and the Chinese Foreign Minister promising that there will be ‘no surrender’ to foreign pressure, there is a very real threat that the current setback is the beginning of yet another drawn out phase of the trade war as they seek to show strength domestically."

Even news that President Trump will meet with China’s Jinping Xi at the G20 meeting in June has done little to stem risk aversion.

Spreadex analyst Connor Campbell said trading could get "a lot worse" once the US gets involves.

"The Dow futures have the index plunging another 300 points when the bell rings on Wall Street, wiping out last Friday’s rebound and forcing it to a 6 and a half-week low of 25,650. There’s basically nothing on the agenda to distract from the US-China trade tug-of-war this afternoon, meaning it is going to hard for the Dow Jones to avoid starting with a bloodied nose."

On home turf, there was growing concern over Prime Minister Theresa May’s ability to hold on to power as cross-party Brexit talks were close to collapse. Investors were also eyeing next week's European elections as opinion polls pointed to a near wipe-out of the Conservatives.

In equity markets, Vodafone was the worst performer after an article in The Sunday Times suggested that the company was ready to slash its dividend to pay for 5G investment.

Shares in Metro Bank slumped even as the challenger bank said its plans to raise £350m of equity capital were well advanced after it was forced to reassure customers their money was safe.

Metro announced the planned capital raising in February after lax accounting caused it to under-report the risk of millions of pounds of commercial property loans and loans to commercial buy-to-let operators. The error led to speculation about the bank's financial strength which it sought to quash at the weekend.

CMC Markets analyst Michael Hewson said: "Not surprisingly shareholders are furious having already been tapped for £300m last summer and while the bank has announced this morning that the £350m capital raising is well advanced, they haven’t answered any of the questions around why the error happened in the first place.

"No-one has been held accountable despite the fact that the error was only spotted by the Bank of England, and not by the bank, or its own auditors.

"This clearly raises questions over the banks risk management procedures, as well as its corporate governance, something that investors are likely to raise later this month at the bank's AGM."

Diploma lost ground as it posted a 13% rise in first-half adjusted pre-tax profit but said there have been signs of a slowdown in the industrials seals market.

Victrex was lower after the polymer solutions provider reported a 13% drop in first-half revenue to £145.7m, while Intu Properties and Man Group were hit by downgrades at JPMorgan and Goldman Sachs, respectively.

On the upside, British Gas owner Centrica was the top riser as it maintained its full-year guidance on cash flow and net debt but said a "challenging" environment due to falling gas prices, tariff caps, warmer weather and nuclear outages had forced it to conduct a strategic review of its portfolio.

Oil giants Shell and BP gushed higher as oil prices rose after Saudi Arabia said two of its oil tankers were attacked over the weekend near the Strait of Hormuz.

Shell was also boosted by an upgrade to 'buy' at HSBC, while Marks & Spencer advanced on the back of an upgrade to 'buy' at Citi.

Market Movers

FTSE 100 (UKX) 7,197.52 -0.08%
FTSE 250 (MCX) 19,255.68 -0.57%
techMARK (TASX) 3,491.89 -0.95%

FTSE 100 - Risers

Centrica (CNA) 94.20p 1.73%
International Consolidated Airlines Group SA (CDI) (IAG) 506.60p 1.60%
Royal Dutch Shell 'B' (RDSB) 2,469.00p 1.48%
Informa (INF) 761.00p 1.47%
Royal Dutch Shell 'A' (RDSA) 2,457.00p 1.26%
BP (BP.) 530.50p 1.20%
Compass Group (CPG) 1,720.00p 0.76%
National Grid (NG.) 840.80p 0.63%
Rentokil Initial (RTO) 384.30p 0.47%
Relx plc (REL) 1,749.50p 0.43%

FTSE 100 - Fallers

Vodafone Group (VOD) 132.62p -4.59%
TUI AG Reg Shs (DI) (TUI) 794.40p -4.03%
Sainsbury (J) (SBRY) 205.30p -3.02%
BT Group (BT.A) 203.37p -2.60%
ITV (ITV) 116.45p -2.43%
Melrose Industries (MRO) 178.35p -2.17%
Royal Bank of Scotland Group (RBS) 227.90p -2.15%
Evraz (EVR) 575.80p -1.81%
Smurfit Kappa Group (SKG) 2,198.00p -1.70%
Smiths Group (SMIN) 1,474.50p -1.60%

FTSE 250 - Risers

Amigo Holdings (AMGO) 230.00p 2.68%
Vivo Energy (VVO) 126.28p 2.50%
Hunting (HTG) 550.00p 2.14%
Rank Group (RNK) 161.60p 1.76%
Tullow Oil (TLW) 216.80p 1.74%
Stagecoach Group (SGC) 136.40p 1.64%
Hilton Food Group (HFG) 1,032.00p 1.57%
Energean Oil & Gas (ENOG) 812.00p 1.50%
Millennium & Copthorne Hotels (MLC) 450.00p 1.35%
Pershing Square Holdings Ltd NPV (PSH) 1,344.17p 1.07%

FTSE 250 - Fallers

Intu Properties (INTU) 92.08p -5.40%
Sirius Minerals (SXX) 18.28p -4.99%
AJ Bell (AJB) 450.00p -4.86%
Rotork (ROR) 284.20p -4.44%
Man Group (EMG) 145.15p -4.35%
Aston Martin Lagonda Global Holdings (AML) 825.00p -3.96%
Just Group (JUST) 64.30p -3.67%
GVC Holdings (GVC) 577.20p -3.35%
Convatec Group (CTEC) 141.75p -3.28%
Kier Group (KIE) 320.60p -3.14%