London close: Stocks follow pound lower
London stocks finished in the red on Monday, alongside losses in sterling, as investors geared up for votes on amendments to the Prime Minister's proposal for the UK's withdrawal from the European Union and fretted about global growth, with a better-than-expected reading on German business sentiment doing little to improve the mood.
The FTSE 100 was down 0.42% at 7,177.58, alongside a drop of 1.08% to 18,792.95 for the second-tier index, while the pound was off 0.3% against the US dollar at 1.31695 and 0.39% weaker versus the euro at 1.1642.
In parallel, and in part mimicking moves elsewhere on the globe, yields on 10-year benchmark Gilts fell below the psychological 1.0% level as investors sought-out safe havens.
Earlier, Theresa May gave an update to the Commons on her the path the government had chosen to follow, even as ministers denied reports over the weekend that a number of them were plotting to oust her from the top job.
May said that "as things stood", she did not yet have sufficient support for her deal, but she still intended to carry out a third so-called 'meaningful vote' and agreed to allow MPs indicative votes on her plans in order to explore alternatives.
But she would not commit to delivering the outcome of any such votes, arguing that "the votes could lead to an outcome that is un-negotiable with the European Union."
MPs were set to start voting on amendments to a neutral government motion on Brexit at 2200 GMT.
Joshua Mahony at IG summed up the day's developments surrounding Brexit, telling clients: "The UK is at an impasse, with seemingly few options at hand. The hope to keep extending the timeline to somehow hope that MPs will ultimately vote for the current deal looks doomed to fail, and even a change in leadership is unlikely to bring about a deal that would garner enough support to pass.
"We are increasingly looking likely to see the extremes take place, with a no-deal Brexit currently the default position for the UK. However, with the pound remaining indecisive in its direction, it is clear that market perceive a referendum or revoking of article 50 as being just as likely as a no-deal Brexit."
Meanwhile, worries about global growth were weighing on market sentiment around the world, with the US central bank's more dovish than expected policy announcement last week following uninspiring economic data seemingly doing little to reassure investors.
Nonetheless, according to Mislav Matejka, global equity strategist at JP Morgan, the current "consolidation" in stockmarkets was unlikely to be either extended nor deep.
His recommendation - which, admittedly, perhaps not all analysts shared - was for clients to add further to their long positions.
"We advise to use it as an opportunity to add further, as we expect the rebound to gain fundamental traction in 2H," he said.
There was some good news in the form of Germany's latest Ifo survey, however, which showed business confidence unexpectedly improved in March.
The Ifo business climate index rose to 99.6 this month from a revised 98.7 in February, beating expectations for a reading of 98.5. The current assessment index increased to 103.8 from 103.6, topping expectations for a reading of 102.0.
In addition, the expectations index improved to 95.6 from 94.0 in February, coming in in line with forecasts.
Andrew Kenningham, chief Europe economist at Capital Economics, said that although the Ifo headline is a relief following last week's disappointing German manufacturing figures, it does not suggest that the German economy is out of the woods.
"For a start, the manufacturing component of the survey actually fell (from 9.1 to 6.6) which implies that the recession in that sector may still be getting worse. And the business expectations index published by CES Ifo today is still consistent on past form with manufacturing output contracting by around 2% year-over-year."
Data out at the end of last week from IHS Markit showed that German manufacturing activity contracted for the third month in a row in March. The flash purchasing managers' index for the sector fell to 44.7 from 47.6 the month before, missing expectations for a reading of 48.0 and marking the lowest level in six-and-a-half years.
In equity markets, equipment rental firm Ashtead and plumbing products maker Ferguson - which both have a big presence in the US - were under the cosh amid worries about an economic slowdown Stateside, with the latter set to update investors the following day.
Rolls-Royce retreated as San Francisco-based activist investor ValueAct Capital Management cut its stake in the company to 9.48% from 10.94%, while United Utilities was knocked lower by a downgrade to 'hold' from 'buy' at Deutsche Bank.
Wood Group slumped after it agreed the sale of its Terra Nova Technologies division - a conveying and material handling systems solutions business - to Murray & Roberts subsidiary Cementation Americas for $38m. The stock was hit by a downgrade to 'underperform' from 'hold' at Jefferies.
Doorstep lender Provident Financial fell as it once again urged its shareholders to reject a £1.3bn hostile bid from smaller rival Non-Standard Finance, and announced the appointment of a new managing director of Vanquis Bank.
Going the other way, shares in satellite telecommunications group Inmarsat surged after agreeing to be bought by a group of private equity firms and pensions funds led by Apax in a $3.4bn deal.
Investors ordered more Domino's Pizza after the Sunday Telegraph reported that US fund Asteya Partners, which has a seat on the board of Burger King’s parent company, is building a stake in the London-listed takeaway franchiser.
Medical products and technologies company ConvaTec rallied as it has appointed Karim Bitar - the chief executive of animal genetics group Genus - as its new CEO with effect from 30 September. Genus shares fell sharply.
Debenhams shares recovered to trade up, after Sports Direct slammed the department store chain for rejecting a bid for its Danish business, Magasin du Nord, which it said was in excess of fair value and would address its liquidity problems.
Shares in Computacenter dropped as Berenberg cut the stock's target price from 1,600p to 1,400p.