London midday: Stocks subside as Capita and builders weigh, but pound pares gains

London stocks had edged lower by midday on Wednesday even as the pound pared earlier gains against the dollar, dragged down by weakness in the housebuilding sector and a profit warning from outsourcer Capita.

The FTSE 100 was down 0.2% to 7,575.17, while the pound was flat against the dollar at 1.4145 and down 0.4% versus the euro at 1.1356 after diplomats confirmed there was no room for discussion about passporting rights for British banks.

The City of London has been lobbying the EU to allow the sector to retain these rights post-Brexit, which allow banks the right to offer services across the EU’s current 28 members. But the EU’s chief negotiator, Michel Barnier, has already made it clear that Brussels intends to remove the rights after March 2019, and on Wednesday several diplomats continued to brief the same message.

Speaking following a seminar held by the EU with envoys from the 27 remaining member states, one said: “There will be no passporting rights.”

Market participants were also mulling over a consumer sentiment survey released overnight. GfK’s consumer confidence index rose four points to -9 in January, beating expectations for the reading to be unchanged at -13.

Joe Staton, head of market dynamics at GfK, said: “Having survived Christmas, New Year, the January Sales and Blue Monday, bullish Brits report a more upbeat view of their financial prospects for 2018 this month. From expectations for their personal financial situation to the outlook for the UK economy and major purchase index, we are reporting a rebound in levels of optimism across the board after two years of the overall index score sitting at zero or in negative territory."

The market's main focus of the day will come after the UK exchange closes, when the Fed makes it rate announcement at 1900 GMT. Although the meeting itself isn’t expected to contain many surprises, it will be Janet Yellen’s last as Chair as she passes the baton to Jerome Powell. Markets are currently pricing more than 90% probability of another 25 basis point hike at the March meeting.

Housebuilders were the biggest drag, with Persimmon, Barratt Developments, Taylor Wimpey and Berkeley Group all firmly in the red following a report in The Times that property developers are set to lose planning permission on unused land if they fail to hit construction targets under moves to kickstart housebuilding.

In company news, Capita tumbled more than 40% after it announced a rights issue for this year, shelved its dividend plans and warned over its 2018 profit. Peers Mitie and Serco both lost ground.

Spreadex analyst Connor Campbell said: “Despite the pound shedding its early growth against the dollar, and sinking into the red against the euro, the FTSE couldn’t shake its losses.

“It really does seem as if Capita’s now 42% collapse - the stock is trading at a 15-year nadir - has spooked UK investors, especially coming so soon after Carillion was wiped off the face of the earth.”

Marks & Spencer was lower after it announced plans to close another eight stores in a move that will affect 468 jobs.

FTSE 250 soft drinks maker Britvic was in the red after it said first-quarter revenue rose 3.3%, although on an organic basis excluding the acquisition of Bela Ischia, it was up a more modest 0.7%. The group also highlighted uncertainty from the introduction of the soft drinks levy.

Budget airline Wizz Air flew lower as it net profit guidance of between €265m and €280m for 2018 fell short of analysts’ expectations.

On the upside, SSE rallied as it upgraded its estimate for annual earnings and reported progress in delivery of operations and returns from long-term investments.

Dairy Crest advanced after saying that revenue in the nine months to the end of December 2017 was “well ahead” of the previous year thanks to a strong performance from its key brands while Polypipe rose after saying it has as entered into exclusive negotiations to sell its French operations.

Paddy Power was boosted by an upgrade to ‘buy’ at Investec, while Softcat was lifted by an upgrade to ‘hold’ at the same outfit and Informa was higher after an upgrade to ‘buy’ at Panmure Gordon.

TalkTalk was knocked sharply by a downgrade from Exane BNP Paribas, while Tullow Oil gushed lower after a downgrade to ‘hold’ at Canaccord and Micro Focus was hit by a downgrade to ‘sell’ at Investec.

SSP was trading down after being cut to ‘sell’ at Goldman Sachs and Hargreaves Lansdown slipped after a downgrade to ‘underperform’ at Credit Suisse.

Market Movers

FTSE 100 (UKX) 7,575.17 -0.17%
FTSE 250 (MCX) 20,339.88 -0.15%
techMARK (TASX) 3,439.95 -0.19%

FTSE 100 - Risers

BAE Systems (BA.) 594.60p 1.85%
SSE (SSE) 1,310.00p 1.51%
United Utilities Group (UU.) 745.00p 1.31%
Paddy Power Betfair (PPB) 8,220.00p 1.23%
Rolls-Royce Holdings (RR.) 869.00p 1.12%
SEGRO (SGRO) 580.40p 1.11%
Johnson Matthey (JMAT) 3,344.00p 1.09%
Unilever (ULVR) 4,020.75p 0.99%
Pearson (PSON) 693.60p 0.67%
National Grid (NG.) 806.20p 0.62%

FTSE 100 - Fallers

Persimmon (PSN) 2,509.00p -2.41%
Taylor Wimpey (TW.) 190.85p -2.18%
Barratt Developments (BDEV) 587.80p -2.16%
Shire Plc (SHP) 3,368.80p -1.68%
Berkeley Group Holdings (The) (BKG) 3,984.00p -1.68%
Micro Focus International (MCRO) 2,150.00p -1.33%
G4S (GFS) 283.50p -1.15%
Kingfisher (KGF) 347.10p -1.11%
Direct Line Insurance Group (DLG) 368.50p -1.10%
Marks & Spencer Group (MKS) 301.90p -1.05%

FTSE 250 - Risers

Dairy Crest Group (DCG) 585.50p 4.55%
FDM Group (Holdings) (FDM) 955.00p 3.92%
Auto Trader Group (AUTO) 361.90p 3.11%
RDI Reit (RDI) 35.10p 2.63%
Dechra Pharmaceuticals (DPH) 2,388.00p 2.58%
Rank Group (RNK) 229.00p 2.46%
UDG Healthcare Public Limited Company (UDG) 813.00p 2.39%
Hochschild Mining (HOC) 229.10p 2.32%
Softcat (SCT) 530.00p 2.32%
Telecom Plus (TEP) 1,164.00p 2.28%

FTSE 250 - Fallers

Capita (CPI) 204.90p -41.09%
TalkTalk Telecom Group (TALK) 107.60p -17.67%
AA (AA.) 127.20p -5.04%
Britvic (BVIC) 745.61p -4.90%
Domino's Pizza Group (DOM) 341.57p -3.86%
Babcock International Group (BAB) 680.00p -3.33%
Vectura Group (VEC) 98.50p -3.15%
Hikma Pharmaceuticals (HIK) 970.60p -3.13%
Serco Group (SRP) 92.05p -2.75%
Wizz Air Holdings (WIZZ) 3,493.00p -2.32%