London close: FTSE falls on Brexit uncertainty, drop in banking shares
London stocks were in the red on Monday as investors erred on the side of caution ahead of a key Brexit speech by Prime Minister Theresa May.
The FTSE 100 closed down 0.15% to 7,327.13 points.
The pound dropped 1.09% versus the dollar at $1.2049 and slid 0.68% against the euro at €1.1373 after the Sunday Times reported that May will indicate in her Tuesday speech that she plans to pursue a ‘hard’ Brexit and quit the European Union’s single market to gain more control over migration and the country’s laws.
However, May’s spokesperson told Reuters on Monday that the report was “speculation”.
ETX Capital analyst Neil Wilson said: “If the UK is heading straight out of the single market, a clean break with no transition deal, the pound could drop a lot more. Sterling’s fall, though around 20% since June, has not gone far enough to really reflect the UK leaving the single market. Or, we might witness a significant reversal in recent pound falls if there is something positive to shout about.”
The Prime Minister’s office is yet to confirm what time May’s speech will take place on Tuesday but media reports have stated 1145 GMT.
On the corporate front, Royal Bank of Scotland led banking shares lower after Goldman Sachs downgraded the stock to ‘neutral’ from ‘buy’ on valuation grounds and removed it from its Pan-Europe Buy List.
Goldman attributed the underperformance relative to the sector mainly due to the impact of the referendum outcome, which led it to significantly cut its earnings forecasts due to expectations of lower loan growth and rates and higher credit costs.
Barclays and Lloyds Banking Group were also in the red.
Housebuilders retreated, including Taylor Wimpey and Barratt Developments, on renewed fears of Brexit hurting the market.
Vodafone declined after HSBC downgraded the stock to ‘hold’ from ‘buy ’and cut the price target to 240p from 270p.
Going the other way, mining stocks rallied after HSBC raised the target price on multiple copper miners and diversified miners including Antofagasta, KAZ Minerals, Anglo American, BHP Billiton, Glencore and Rio Tinto. The bank also raised its medium-term copper price forecast from 2017 by 13-20%.
Burberry advanced after it confirmed that new chief executive Marco Gobbetti will join the fashion retailer at the end of this month, sending its shares to an 18-month high.
In economic data, Rightmove said UK house prices in January rose 0.4% compared to a month ago and 3.2% compared to a year ago to an average asking price of £300,245.
The Eurozone’s trade surplus widened to €22.7bn in November from €19.9bn in October, compared to forecasts of €20.8bn, as exports exceed imports by €25.9bn.
There are no US economic data releases due with markets closed for Martin Luther King Day.
Market Movers
FTSE 100 (UKX) 7,327.13 -0.15%
FTSE 250 (MCX) 18,307.71 -0.35%
techMARK (TASX) 3,412.89 -0.36%
FTSE 100 - Risers
Anglo American (AAL) 1,358.00p 2.14%
Rio Tinto (RIO) 3,488.00p 2.06%
Burberry Group (BRBY) 1,639.00p 1.74%
Randgold Resources Ltd. (RRS) 6,825.00p 1.71%
Mediclinic International (MDC) 805.50p 1.70%
Glencore (GLEN) 321.90p 1.64%
Reckitt Benckiser Group (RB.) 6,953.00p 1.58%
BHP Billiton (BLT) 1,477.00p 1.55%
Fresnillo (FRES) 1,434.00p 1.49%
Imperial Brands (IMB) 3,636.00p 1.28%
FTSE 100 - Fallers
Royal Bank of Scotland Group (RBS) 215.00p -2.76%
Dixons Carphone (DC.) 343.10p -2.22%
ITV (ITV) 204.20p -2.11%
Prudential (PRU) 1,578.50p -2.11%
Standard Life (SL.) 349.70p -2.07%
Lloyds Banking Group (LLOY) 64.69p -2.04%
Taylor Wimpey (TW.) 169.10p -2.03%
Vodafone Group (VOD) 210.50p -1.96%
Barclays (BARC) 231.20p -1.72%
Persimmon (PSN) 1,963.00p -1.70%
FTSE 250 - Risers
Ashmore Group (ASHM) 302.10p 6.56%
Acacia Mining (ACA) 434.50p 3.90%
Aggreko (AGK) 1,012.00p 2.48%
Greggs (GRG) 1,001.00p 2.40%
Vedanta Resources (VED) 1,040.00p 2.36%
Moneysupermarket.com Group (MONY) 302.20p 2.03%
CLS Holdings (CLI) 1,556.00p 1.77%
Aveva Group (AVV) 1,976.00p 1.65%
JPMorgan Indian Investment Trust (JII) 637.50p 1.51%
Pagegroup (PAGE) 432.00p 1.41%
FTSE 250 - Fallers
Virgin Money Holdings (UK) (VM.) 311.00p -4.25%
SIG (SHI) 104.50p -4.04%
International Personal Finance (IPF) 165.70p -3.66%
Allied Minds (ALM) 407.00p -3.58%
Mitie Group (MTO) 207.10p -3.18%
Ibstock (IBST) 180.30p -3.17%
OneSavings Bank (OSB) 322.70p -3.12%
Supergroup (SGP) 1,636.00p -2.97%
Diploma (DPLM) 1,005.00p -2.71%
Crest Nicholson Holdings (CRST) 501.50p -2.62%