London midday: Stocks slip further as Thomas Cook plunges, Greggs bucks trend

London stocks had fallen a little further by midday on Tuesday, with Thomas Cook under pressure after another profit warning, as investors grappled with the latest headlines on US-China relations.

The FTSE 100 was down 0.3% to 7,017.74, while the pound was 0.6% weaker against the dollar at 1.2752 and 0.4% lower versus the euro at 1.1267 amid concerns about how Theresa May will get her Brexit deal through Parliament, especially after Donald Trump cautioned that the US could stop trading with the UK.

Trump said the latest Brexit deal announced by Theresa May was a "great deal for the EU" but could mean that the US stops trading with the UK. In a speech outside the White House on Monday, the US President said: "I think we have to take a look at, seriously, whether or not the UK is allowed to trade. Because, you know, right now, if you look at the deal, they may not be able to trade with us."

However, a Downing Street spokesperson later played down the claims.

Meanwhile, Sino-US relations were in focus again after Trump renewed his China tariff threats ahead of the G20 meeting at the end of the week, though China's foreign ministry spokesman told reporters that Trump and president Xi Jinping had agreed to reach a "mutually beneficial" arrangement on trade.

Reports of Trump and Xi's agreement initially prompted a flurry of buying, pushing US stock futures up around 1% in a matter of minutes. However, the move was erased when it became clear that the comments were referring to a telephone call at the start of the month.

On the UK data front, the latest survey from the Confederation of British Industry showed retail sales picked up in November, but the outlook weakened.

The reported sales balance rose to +19 this month from +5 in October, coming in ahead of expectations for a balance of +10.

Anna Leach, head of economic intelligence at the CBI, said it was encouraging to see sales had strengthened in November. However, she also said that business sentiment remains poor, investment intentions are flat and headcount continues to decline.

In corporate news, shares in FTSE 250 tour operator Thomas Cook were in freefall after it withdrew its dividend and cut its annual profits guidance for the third time this year. The company, having only just issued a second profit warning in September, said its final result was expected to be around £30m lower than previously guided due to a number of legacy and non-recurring charges.

FTSE 100 peer TUI was also on the back foot.

Russ Mould, investment director at AJ Bell, said suspending the dividend was a sensible move, even if it does deprive shareholders of a stream of cash.

"Too often companies keep the payment intact, knowing that it helps to keep shareholders happy. In reality, it is better to strip back the rewards and put the health of the business first."

Mould said the big concern in the update was the spike in net debt to £389m, which is 45% higher than the consensus analyst forecast of £267m. "Analysts had forecast for the business to move into a net cash position in 2020 and that now seems unlikely unless there is a radical improvement in trading," he said.

Elsewhere, NMC Health was hit by a downgrade to 'underperform' from 'hold' at Jefferies.

On the upside, Coca-Cola HBC was the standout gainer on the top-flight index as UBS double-upgraded the stock to 'buy' from 'sell' and hiked the price target to 2,650p from 2,050p saying best-in-class growth and balance sheet optionality are no longer priced in.

Bakery chain Greggs surged as it said total sales in the eight weeks to 24 November were up 9% and lifted its 2018 profit forecast. It now expects full-year profit of at least £86m, up from previous guidance of £81.8m.

Quality assurance company Intertek was a high riser as it said group revenue rose 0.5% at actual exchange rates to £2.31bn in the 10 months to 31 October and reaffirmed its 2018 forecast of good organic revenue growth with moderate margin progression at constant currency and strong cash conversion.

Pennon gained as the utility posted a 2.9% rise in first-half pre-tax profit and a 3.1% increase in revenue and Hikma Pharmaceuticals was boosted by an upgrade to 'buy' from 'hold' at Jefferies.

Market Movers

FTSE 100 (UKX) 7,017.74 -0.26%
FTSE 250 (MCX) 18,675.06 -0.24%
techMARK (TASX) 3,451.03 -0.24%

FTSE 100 - Risers

Coca-Cola HBC AG (CDI) (CCH) 2,398.00p 5.69%
Centrica (CNA) 136.30p 2.64%
SSE (SSE) 1,141.50p 1.92%
Intertek Group (ITRK) 4,729.00p 1.79%
Admiral Group (ADM) 2,068.00p 1.62%
Marks & Spencer Group (MKS) 309.20p 1.38%
National Grid (NG.) 836.90p 1.28%
Rentokil Initial (RTO) 327.60p 1.27%
Ocado Group (OCDO) 799.80p 1.27%
Direct Line Insurance Group (DLG) 329.50p 1.23%

FTSE 100 - Fallers

GVC Holdings (GVC) 770.50p -4.76%
NMC Health (NMC) 3,454.00p -4.06%
TUI AG Reg Shs (DI) (TUI) 1,204.50p -3.64%
Barratt Developments (BDEV) 496.40p -2.28%
Rio Tinto (RIO) 3,556.00p -2.01%
Tesco (TSCO) 196.70p -1.94%
Johnson Matthey (JMAT) 3,019.00p -1.88%
Smith (DS) (SMDS) 341.30p -1.67%
Antofagasta (ANTO) 793.00p -1.59%
Evraz (EVR) 469.10p -1.47%

FTSE 250 - Risers

Greggs (GRG) 1,379.00p 11.48%
Spirent Communications (SPT) 135.20p 4.81%
TalkTalk Telecom Group (TALK) 126.00p 4.05%
Greene King (GNK) 525.00p 2.54%
Keller Group (KLR) 636.00p 2.42%
Sophos Group (SOPH) 360.60p 2.04%
Pennon Group (PNN) 770.80p 1.90%
Polymetal International (POLY) 810.00p 1.84%
NewRiver REIT (NRR) 232.10p 1.80%
Millennium & Copthorne Hotels (MLC) 471.00p 1.73%

FTSE 250 - Fallers

Thomas Cook Group (TCG) 37.65p -22.44%
UDG Healthcare Public Limited Company (UDG) 562.50p -9.35%
Indivior (INDV) 94.80p -6.05%
Convatec Group (CTEC) 153.85p -4.94%
Cranswick (CWK) 2,752.55p -4.16%
Mediclinic International (MDC) 341.50p -3.99%
Ibstock (IBST) 227.20p -2.82%
Ultra Electronics Holdings (ULE) 1,484.00p -2.75%
CYBG (CYBG) 207.20p -2.72%
Victrex plc (VCT) 2,606.00p -2.62%