London midday: Stocks reverse losses as pound slumps on Brexit vote delay

London stocks turned a touch higher by midday on Monday as the pound slid on news that Theresa May has called off this week's parliamentary vote on the Brexit deal.

The FTSE 100 was up 0.1% to 6,781.82, reversing earlier losses as sterling dropped 0.5% against the dollar to 1.2669, having earlier fallen to $1.2656 - its lowest level since June last year. Against the euro, it was down 0.8% at 1.1101 as the BBC and Bloomberg reported that the Prime Minister had decided to postpone the vote after being warned that she was on course for a devastating defeat.

According to the report, the vote, which had been due to take place on Tuesday, will be now be rescheduled.

Neil Wilson, chief market analyst at Markets.com, said: "If confirmed, May seems to have accepted she had no chance of winning and is seeking to save her premiership by some last minute brinkmanship. Sterling remains at the mercy of highly sensitive news flow around Brexit and this morning has been a case in point.

"What does pulling the vote mean? The situation remains very fluid and it is hard to draw any concrete conclusions at this point. However, if she is pulling the vote to go back to Brussels it could suggest a renegotiation of the backstop, or at least clarification. We must note that the EU has categorically said this is the only deal and it seems unlikely it would revisit."

The prospect was growing that May could now back a second referendum, with the public asked whether they accept May's deal or no deal, with the EU’s top court ruling earlier in the morning that the UK can unilaterally revoke the Brexit process.

"A complete shambles is about the only way to describe this situation and investors are right to be very cautious about UK assets," Wilson added.

According to reports, May will make a Commons statement at 1530 GMT.

Adding to the gloom, data out earlier from the Office for National Statistics showed that UK economic growth remains very sluggish, held back by an unexpectedly steep decline in manufacturing activity.

Gross domestic product in October increased 0.1% compared to the preceding month, which economists had expected after two flat months. On a three-month basis, GDP growth in the period from August to October slowed to 0.4%, from 0.6% in the three months to September, which also matched the consensus forecast.

Industrial production unexpectedly fell 0.6% month-on-month, dragged down by a 0.9% collapse in manufacturing output. The manufacturing decline reflected a big drop in pharmaceuticals output and slower car production.

Year on year, industrial production was down 0.8% in October after being flat in September, while manufacturing was down 1.0% after rising 0.5% a month ago.

The retail sector was also in focus after figures released by Springboard and the British Retail Consortium revealed that footfall fell 3.2% last month compared to a 0.2% increase the year before and marking the twelfth consecutive month of decline.

The 'Black Friday' effect was blamed for the drop, as it meant shoppers opted to make purchases online, where deals were available for longer, rather than shop in-store.

High street footfall was down 3.8% in the four weeks from 28 October to 24 November, marking the biggest drop since April, when it fell by 4%. The East Midlands and the South East suffered the worst declines, with footfall there down 6.5% and 6%, respectively.

Helen Dickinson, chief executive of the BRC, said: "With one-in-every-three-pounds of non-food purchases made online last month, Black Friday accelerated the movement from in store to online in the lead up to Christmas. The Black Friday discounting period also began earlier for a large number of retailers negatively impacting footfall across a longer period over the month."

On the corporate front, Randgold Resources was the top gainer as gold prices were solid and holding on to last week's gains.

Smith & Nephew and Spire Healthcare advanced on the back of upgrades to 'overweight' at Morgan Stanley, while AstraZeneca was boosted as Deutsche Bank upped its target price to 6,900p from 6,500p.

NMC Health was on the front foot as it said its cash flow generation was improving in the second half of the year, as the Gulf region hospital operator reaffirmed full-year sales and profit guidance.

Retirement products specialist Just Group surged after the Bank of England's regulatory arm confirmed a less onerous plan for equity release mortgage providers than some feared. The Prudential Regulation Authority confirmed that transitional relief will remain available for business arranged pre-2016.

Centrica was the worst performer on the top-flight index as Deutsche Bank cut its price target on the British Gas owner to 135p from 155p.

Domino's Pizza suffered heavy losses following a Sunday Times report that disgruntled franchisees have written to the company's board threatening to "declare war" on the pizza chain if they are not given a bigger share of the profits.

Housebuilders were in focus as Peel Hunt said the short-term outlook for the sector remains volatile, mainly due to the economic uncertainty caused Brexit. However, the longer-term prognosis for the industry is "favourable" whether the Brexit deal passes through Parliament this week or not.

Peel Hunt cut Berkeley Group and Barratt Developments to 'add' from 'buy'. It also downgraded Crest Nicholson to 'reduce' from 'hold' and Taylor Wimpey to 'hold' from 'add'.

Outside the FTSE 350, support services and construction group Interserve tumbled 52% after confirming that it was in talks with its banks about converting much of its sizeable debt pile into new shares. The government contractor said it would announce its finalised deleveraging plan, which will be subject to shareholder approval, in early 2019.

Market Movers

FTSE 100 (UKX) 6,799.57 0.32%
FTSE 250 (MCX) 17,678.76 -0.93%
techMARK (TASX) 3,352.86 0.29%

FTSE 100 - Risers

Randgold Resources Ltd. (RRS) 6,876.00p 3.37%
AstraZeneca (AZN) 6,092.00p 2.78%
Imperial Brands (IMB) 2,400.50p 2.70%
GlaxoSmithKline (GSK) 1,471.10p 2.34%
3i Group (III) 782.80p 2.25%
British American Tobacco (BATS) 2,718.00p 2.05%
Pearson (PSON) 928.80p 1.82%
Fresnillo (FRES) 813.85p 1.65%
London Stock Exchange Group (LSE) 3,937.00p 1.65%
BAE Systems (BA.) 455.60p 1.33%

FTSE 100 - Fallers

GVC Holdings (GVC) 643.00p -3.89%
Centrica (CNA) 134.35p -3.76%
ITV (ITV) 127.55p -2.89%
Royal Mail (RMG) 295.60p -2.70%
SSE (SSE) 1,060.50p -2.62%
Associated British Foods (ABF) 2,198.00p -1.96%
Evraz (EVR) 472.20p -1.95%
Severn Trent (SVT) 1,829.50p -1.69%
Barratt Developments (BDEV) 455.90p -1.51%
Melrose Industries (MRO) 152.25p -1.46%

FTSE 250 - Risers

Just Group (JUST) 100.00p 21.80%
Spire Healthcare Group (SPI) 113.37p 7.16%
Contour Global (GLO) 170.60p 2.52%
Centamin (DI) (CEY) 102.65p 2.45%
Sanne Group (SNN) 569.00p 2.15%
WH Smith (SMWH) 1,900.00p 1.50%
Daejan Holdings (DJAN) 5,680.00p 1.43%
Mediclinic International (MDC) 334.70p 1.33%
Bakkavor Group (BAKK) 143.00p 1.27%
Quilter (QLT) 115.56p 1.19%

FTSE 250 - Fallers

Thomas Cook Group (TCG) 27.94p -9.58%
Cairn Energy (CNE) 154.70p -7.75%
Domino's Pizza Group (DOM) 239.50p -6.99%
Crest Nicholson Holdings (CRST) 317.60p -5.92%
Galliford Try (GFRD) 611.60p -5.62%
Premier Oil (PMO) 71.65p -5.54%
Sirius Minerals (SXX) 20.68p -5.14%
AA (AA.) 79.88p -4.93%
Tullow Oil (TLW) 181.30p -4.38%
Superdry (SDRY) 646.50p -4.15%