London midday: Stocks off lows as EU agrees Brexit extension; banks under the cosh

London stocks were off earlier lows but still in the red by midday on Monday, with banking shares pacing the decline after disappointing earnings from HSBC, as traders mulled the EU's decision to grant a three-month Brexit extension.

The FTSE 100 was down 0.1% at 7,319.58, while the pound was flat against the dollar at 1.2827 and 0.2% lower versus the euro at 1.1562 after the EU agreed to extend the Brexit deadline to 31 January 2020.

Donald Tusk, president of the European Council, tweeted: "The EU27 has agreed that it will accept the UK's request for a #Brexit flextension until 31 January 2020. The decision is expected to be formalised through a written procedure."

The news comes ahead of a Commons vote on whether to hold an election on 12 December. A two-thirds majority is required for Prime Minister Boris Johnson's motion to pass.

David Cheetham, chief market analyst at XTB, said: "Speculation that the bloc would only entertain a shorter extension at the request of France had caused some doubts but it appears that once more the EU are trying hard to be seen to not force the issue.

"An election before year-end seems the most likely outcome, although there appears to be a greater chance of this occurring December 9th, rather than the government’s preferred date of December 12th. MPs will vote later on the PM's proposal but with Labour set to abstain and a two-thirds majority needed it is unlikely to pass. The Lib Dems and SNP are said to favour a slightly earlier date, and have proposed a bill that would only require a simple majority of over 50% to pass.

"Looking at the dates it seems to be splitting hairs with the decision to try and bring it forward to Monday 9th December from Thursday 12th hardly likely to see any tangible impact from the student vote who would be heading home for Christmas given that it is the same week."

Elsewhere, Sino-US trade relations remained in focus after China said that parts of the text for the first phase of a trade deal with the US were "basically completed" as the two sides reached a consensus in areas such as standards used by agricultural regulators.

Spreadex analyst Connor Campbell said: "A high-level phone call last Friday appears to have yielded progress - especially in the poultry sector, with the US agreeing to import cooked birds from China, while Beijing will allow American chickens back into the country."

Investors were also digesting the latest survey from the Confederation of British Industry, which showed that retailers' stock levels were at their highest level on record in October ahead of the Brexit deadline.

The CBI said stock levels in relation to expected sales were at their highest level this month since the survey began in 1983.

Retail sales volumes and orders both fell in the year to October, for the sixth month in a row, although the pace of decline slowed.

The balance of retailers reporting year-on-year growth in sales volumes rose to -10 from -16 the month before and versus expectations of -20.

CBI deputy chief economist Anna Leach said: "Retailers have now endured six months of falling sales, the longest period of decline since the financial crisis. The sector is struggling with ongoing digital disruption, layered on top of cost pressures from a weak pound and the cumulative burden of an outdated business rates regime.

"Retailers have also had to contend with the looming Brexit deadline, which has partly driven a record spike in stocks."

In equity markets, HSBC was the worst performer on the FTSE 100 after the bank reported a drop in third-quarter profit, cautioned over a "challenging" environment and said the outlook for revenue growth is softer than it expected at the half-year. As a result, it now longer expects to reach its return on tangible equity target of more than 11% in 2020.

Other banking stocks followed suit, with Lloyds and RBS also trading lower.

Imperial Brands lost ground after RBC Capital Markets slashed its price target on the underperform-rated stock to 1,600p from 2,100p, while Informa was knocked lower by a downgrade at Goldman Sachs.

Aston Martin Lagonda was weaker after a downgrade to 'underperform' at bank of America Merrill Lynch, which said it sees a "significant increase in financial risk".

Cairn Energy retreated after it said that its Alom-1 well offshore Mexico was found to be dry and has now been plugged and abandoned. The oil and gas exploration company also announced that it now expects an outcome on its long-running tax dispute with the Indian government by next summer.

Ferrexpo fell after saying that chief executive officer Kostyantin Zhevago would temporarily step down to focus on resolving matters related to one of his former businesses in Ukraine. The company has appointed chief financial officer Chris Mawe as acting CEO.

On the upside, luxury brand Burberry was on the front foot after French luxury group LVMH confirmed it had made a takeover approach for Tiffany & Co.

Market Movers

FTSE 100 (UKX) 7,319.58 -0.07%
FTSE 250 (MCX) 20,127.57 0.12%
techMARK (TASX) 3,900.21 0.32%

FTSE 100 - Risers

Antofagasta (ANTO) 897.40p 3.08%
Burberry Group (BRBY) 2,063.00p 2.03%
London Stock Exchange Group (LSE) 6,950.04p 1.94%
3i Group (III) 1,118.00p 1.91%
Rolls-Royce Holdings (RR.) 725.56p 1.79%
Glencore (GLEN) 238.35p 1.75%
SEGRO (SGRO) 835.20p 1.56%
Spirax-Sarco Engineering (SPX) 7,710.00p 1.51%
Ashtead Group (AHT) 2,303.00p 1.50%
Evraz (EVR) 389.60p 1.43%

FTSE 100 - Fallers

HSBC Holdings (HSBA) 592.35p -4.06%
Informa (INF) 756.40p -2.25%
Imperial Brands (IMB) 1,781.75p -2.10%
Lloyds Banking Group (LLOY) 58.79p -2.02%
WPP (WPP) 956.60p -1.83%
Royal Bank of Scotland Group (RBS) 222.80p -1.33%
Reckitt Benckiser Group (RB.) 5,766.00p -1.10%
Unilever (ULVR) 4,585.85p -0.99%
Severn Trent (SVT) 2,278.00p -0.96%
ITV (ITV) 134.95p -0.70%

FTSE 250 - Risers

Sirius Minerals (SXX) 3.10p 3.96%
Elementis (ELM) 149.80p 3.67%
Drax Group (DRX) 308.80p 3.42%
Fisher (James) & Sons (FSJ) 2,010.00p 3.40%
Vesuvius (VSVS) 404.60p 3.11%
Renishaw (RSW) 3,666.00p 2.86%
Wood Group (John) (WG.) 349.60p 2.76%
Dunelm Group (DNLM) 826.50p 2.29%
Ascential (ASCL) 359.80p 2.10%
Homeserve (HSV) 1,160.00p 1.58%

FTSE 250 - Fallers

Cairn Energy (CNE) 173.37p -10.26%
Aston Martin Lagonda Global Holdings (AML) 440.90p -7.22%
Watches of Switzerland Group (WOSG) 276.00p -4.83%
Apax Global Alpha Limited (APAX) 156.88p -4.05%
CYBG (CYBG) 138.20p -3.39%
Ferrexpo (FXPO) 129.80p -2.74%
Riverstone Energy Limited (RSE) 475.50p -2.46%
William Hill (WMH) 196.82p -2.32%
Centamin (DI) (CEY) 115.94p -1.95%
PureTech Health (PRTC) 246.22p -1.90%