London open: Stocks edge lower amid recession fears

London stocks edged lower in early trade on Wednesday, taking their cue from a downbeat session on Wall Street amid a slide in bond yields.

At 0830 BST, the FTSE 100 was off 0.3% at 7,066.40, while the pound was down 0.1% against the dollar and the euro at 1.2278 and 1.1073, respectively.

Oanda analyst Craig Erlam said: "US stocks reversed earlier gains on Tuesday, as the 2-year yield rose to five basis points above the 10-year for the first time since 2007. I fear yield curve inversions are going to become the dinner table bitcoin chat of 2017 in the coming months as prophecy becomes self-fulfilling and we blindly wander into a recession.

"Obviously the timing of this is no coincidence, coming so shortly the US and China decided to step it up a gear and inflict additional tariffs on one another. Naturally this was accompanied by fighting talk from Trump, the usual bashing of the head of his central bank and then some very mixed messages from both sides regarding a phone call that may or may not have happened."

Erlam added: "We're clearly not yet seeing widespread panic about the latest recession warning but the heightened sensitivity to it may eventually take its toll. In much the way that people are questioning whether talk of recession makes one inevitable, the impact on stocks could become self-fulfilling."

In equity markets, Imperial Brands and British American Tobacco were both weaker following news on Tuesday that US tobacco companies Philip Morris and Altria are in merger talks.

Broker Liberum said: "We see some risk that the combined Philip Morris could be a more effective competitor to BAT and Imperial Brands both in the US as well as in other key markets.

"Clearly a successful merger would crystallise the need for both companies and Japan Tobacco to seek out new ways to unlock value. However, the old regulatory hurdles surrounding material market share overlaps in several markets persist meaning that and M&A scenario remains complicated, particularly for BAT.

"Therefore, we see the potential for both BAT and Imperial Brands shares to come under some pressure if it looks likely that the merger of equals proceeds without a hitch. However, of the two we would see Imperial as better positioned to unlock value through potential disposals or a potential break-up."

Elsewhere, oil industry engineer Petrofac was in the red after it reported a fall in interim core earnings due to a decline in contract margins, higher overheads and higher tax and warned of lower revenues in 2020.Earnings before interest, tax, depreciation and amortisation fell 9% to $305m.

On the upside, oil giant BP was the standout gainer on the FTSE 100 after agreeing on Tuesday to sell its entire Alaska business to private oil and gas company Hilcorp Energy for $5.6bn.

Retailer WH Smith was on the front foot as it said its travel division continues to perform strongly and that results for the year to the end of August will be in line with expectations.

Diploma gained as the technical products and services company said trading in the year to 30 September remained in line with its expectations and it's in "active discussions" about further bolt-on acquisitions.

Fashion retailer Ted Baker was trading higher after signing a deal with Japan's Sojitz Infinity to sell its goods in Japanese department stores.

Outside the FTSE 350, shares in Thomas Cook were sharply lower as the travel operator said it had agreed a rescue deal with China's Fosun, which will buy a majority stake for £450m.

Market Movers

FTSE 100 (UKX) 7,066.40 -0.33%
FTSE 250 (MCX) 19,244.70 -0.47%
techMARK (TASX) 3,793.77 -0.50%

FTSE 100 - Risers

BP (BP.) 494.25p 1.27%
BHP Group (BHP) 1,691.00p 1.10%
Morrison (Wm) Supermarkets (MRW) 183.80p 0.88%
Fresnillo (FRES) 703.29p 0.82%
Rio Tinto (RIO) 3,964.00p 0.75%
Sainsbury (J) (SBRY) 197.45p 0.61%
United Utilities Group (UU.) 798.00p 0.38%
Centrica (CNA) 66.86p 0.30%
Tesco (TSCO) 214.30p 0.28%
Evraz (EVR) 484.10p 0.21%

FTSE 100 - Fallers

Prudential (PRU) 1,307.50p -3.00%
Imperial Brands (IMB) 2,024.50p -1.79%
Smurfit Kappa Group (SKG) 2,446.00p -1.77%
Aveva Group (AVV) 3,776.00p -1.72%
Carnival (CCL) 3,359.00p -1.41%
Standard Life Aberdeen (SLA) 247.40p -1.32%
Royal Bank of Scotland Group (RBS) 181.75p -1.30%
Spirax-Sarco Engineering (SPX) 7,695.00p -1.28%
Halma (HLMA) 1,927.00p -1.26%
Aviva (AV.) 354.06p -1.24%

FTSE 250 - Risers

CYBG (CYBG) 140.55p 3.42%
Greggs (GRG) 2,024.00p 2.95%
Ted Baker (TED) 930.50p 2.03%
Polymetal International (POLY) 1,173.00p 1.91%
Kainos Group (KNOS) 494.00p 1.86%
Diploma (DPLM) 1,580.00p 1.80%
Centamin (DI) (CEY) 151.62p 1.66%
Serco Group (SRP) 143.88p 1.32%
WH Smith (SMWH) 2,015.80p 1.14%
Energean Oil & Gas (ENOG) 1,000.00p 0.91%

FTSE 250 - Fallers

Sirius Minerals (SXX) 9.93p -4.43%
Meggitt (MGGT) 589.60p -3.97%
Petrofac Ltd. (PFC) 389.93p -3.96%
PayPoint (PAY) 882.00p -3.50%
Equiniti Group (EQN) 195.50p -3.03%
Woodford Patient Capital Trust (WPCT) 40.80p -2.86%
Rathbone Brothers (RAT) 2,270.00p -2.78%
Fisher (James) & Sons (FSJ) 2,070.00p -2.59%
Provident Financial (PFG) 401.60p -2.41%
Senior (SNR) 197.20p -2.18%