London midday: Stocks slip lower as HSBC, jobs data digested

London equities retreated further from their recent high as Tuesday wore on, as investors digested jobs data but were disappointed by results from HSBC.

The FTSE 100 had dropped around 45 points or 0.6% by midday to 7,174.75 as the index endured a bout of vertigo since ascending to around four-month highs at the end of last week. Sterling was flat against the dollar at 1.2919 and up 0.25% versus the euro at 1.1454.

UK and European officials were said to be working on a new legal text for the backstop plan to avoid a hard border in Ireland, Bloomberg reported. Brexit Secretary Stephen Barclay and Attorney General Geoffrey Cox are holding talks in Brussels this week ahead of the key 27 February vote in the House of Commons.

As the government sails close to the cliff edge with its exit negotiations, the exodus of companies from Britain continued, with Honda confirming on Tuesday that it will close its factory in Swindon in 2021, with loss of 3,500 jobs. This follows the decision from Nissan to pull production of its new model from the UK.

The Japanese carmaker denied Brexit was the reason, however, with Ian Howells, Honda's European chief, telling the BBC: “We are in a position where out investment and focus needs to go somewhere else, it can’t be in the UK,” he said, blaming the move on the "global outlook".

In other key domestic news, data from the Office for National Statistics showed that UK wage growth remained at its post-crisis high at the end of last year, well above inflation.

Unemployment remained at 4.0% in the fourth quarter of the year, though employment increased by 167,000 quarter on quarter, higher than the 151,000 expected.

The ONS said the number of people in work has reached a record high of 32.6m, though it is estimated that more than 800,000 workers are on zero-hours contracts.

Average wage growth held steady at 3.4%, both including and excluding bonuses, which compares to the consumer price index that fell to 1.8% in January from 2% in December.

The headline average earnings number was a little softer than expected in remaining at 3.4%, but the ex-bonus was inline with forecasts and, said David Cheetham, market analyst at XTB, overall represents another solid reading.

"The data relates to December of last year so there is something of a lag, and the recent decline in industry surveys last month will not be seen until the release in March. Due to the lag in this data, it is often not the most market moving, and we’ve seen that this morning, with a pretty subdued reaction in sterling which has drifted back down near the $1.29 handle since the release.

"Looking at the bigger picture the pound remains range bound and is seemingly awaiting further clarity on Brexit before embarking on a sustained move, and therefore economic data remains in the back-seat for now."

The City also remains heavily focused on US-China trade talks, with investors crossing their fingers that the apparent momentum built up in Beijing last week will continue this week. Talks will resume in Washington on Tuesday, with follow-up sessions at a higher level later in the week, the White House said overnight.

Said Joshua Mahony, market analyst at IG: "Global markets have failed to gain any traction today, as news of further US-China trade talks failed to inspire stocks both in Asia and Europe. Marginal losses in China alluded to a growing disillusionment over the failure to make any significant breakthrough despite a ramp up in discussions. However, with the top US and Chinese negotiators lined up to meet once again on Thursday, there is still some hope that we will find a positive conclusion to avert the reintroduction of 25% tariffs in less than two-weeks."

Optimism about progress on a trade agreement between the US and China was being tempered by anxiety about a potential new trade spat between the US and European Union, which would come at a time when the continent is already experiencing a slowdown in growth momentum.

In company news, HSBC was causing a big drag after FTSE 100's largest company by market value posted a 1.0% drop in adjusted net profits for the fourth quarter to reach $3.39bn, falling well short of a consensus estimate for $4.4bn. That was despite a 5.0% rise in adjusted revenues to $12.56bn, which was also short of expectations. Fellow Asia-focused banking giant Standard Chartered was also knocked lower.

"Clearly HSBC’s focus on China and Asia is a double-edged sword," said Neil Wilson at Markets.com. "There are still huge returns and opportunity in these markets, but the bank’s exposure to this region means the recent slowdown in China in particular, as well as fears about what the trade landscape will look like going forward, can bite."

The mining sector was mixed, but Anglo-Aussie giant BHP was in the red as it reported an 8% fall in first-half profits on the back of lower copper earnings and production disruption. Underlying profit from continuing operations fell to $4.03bn from $4.40bn, missing estimates of $4.209bn. However the dividend was maintained at 55 cents a share, two cents higher than forecasts.

InterContinental Hotels was higher after it reported 19% growth in earnings for 2018 as it grew its estate by the fastest rate in a decade. Through its many hotel brands, ranging from Holiday Inn, Crowne Plaza and Kimpton to newer chains Avid, Vocoders and Regent resorts, the FTSE 100 group grew revenue 6% on an adjusted basis to $1.8bn, adjusted operating profits 6% to $805m and adjusted earnings per share to 290.5 cents.

Greggs was on a roll, a vegan sausage roll in fact, after it reported an "exceptionally strong" start to 2019. Total sales were up 14.1% in the first seven weeks of the year, with LFL sales up 9.6%.

Market Movers

FTSE 100 (UKX) 7,166.06 -0.74%
FTSE 250 (MCX) 19,023.16 -0.54%
techMARK (TASX) 3,528.98 -0.14%

FTSE 100 - Risers

TUI AG Reg Shs (DI) (TUI) 842.20p 1.96%
Micro Focus International (MCRO) 1,781.00p 1.86%
Coca-Cola HBC AG (CDI) (CCH) 2,600.00p 1.40%
Fresnillo (FRES) 992.00p 1.22%
United Utilities Group (UU.) 840.40p 1.20%
Hiscox Limited (DI) (HSX) 1,558.00p 1.17%
Anglo American (AAL) 1,964.00p 1.13%
InterContinental Hotels Group (IHG) 4,675.00p 0.99%
Centrica (CNA) 138.80p 0.98%
Royal Bank of Scotland Group (RBS) 254.40p 0.95%

FTSE 100 - Fallers

HSBC Holdings (HSBA) 636.50p -4.10%
Standard Chartered (STAN) 609.30p -3.05%
Reckitt Benckiser Group (RB.) 6,126.00p -2.70%
Melrose Industries (MRO) 167.50p -2.50%
GVC Holdings (GVC) 615.50p -2.30%
Ocado Group (OCDO) 905.60p -2.20%
Glencore (GLEN) 296.60p -2.16%
Wood Group (John) (WG.) 512.80p -1.91%
St James's Place (STJ) 934.40p -1.41%
AstraZeneca (AZN) 6,077.00p -1.28%

FTSE 250 - Risers

Greggs (GRG) 1,715.00p 7.05%
Galliford Try (GFRD) 704.50p 2.70%
FirstGroup (FGP) 93.55p 2.24%
Cobham (COB) 117.85p 2.21%
Centamin (DI) (CEY) 126.75p 2.05%
Drax Group (DRX) 385.00p 1.64%
Ferrexpo (FXPO) 267.30p 1.63%
Dairy Crest Group (DCG) 493.60p 1.48%
Grafton Group Units (GFTU) 763.81p 1.37%
Intu Properties (INTU) 120.85p 1.34%

FTSE 250 - Fallers

Indivior (INDV) 109.45p -7.48%
Plus500 Ltd (DI) (PLUS) 749.50p -7.07%
IP Group (IPO) 103.80p -4.77%
Bank of Georgia Group (BGEO) 1,653.60p -4.14%
Playtech (PTEC) 368.70p -3.96%
Rank Group (RNK) 161.60p -3.35%
Vivo Energy (VVO) 135.44p -2.94%
Restaurant Group (RTN) 131.30p -2.88%
Investec (INVP) 479.20p -2.82%
Premier Oil (PMO) 76.10p -2.75%