London close: Shares dip as analysts take stock of situation after Friday surge
London stocks dipped on Monday as optimism over a trade deal between the US and China faded a bit, with worries about Brexit and uninspiring Chinese data also weighing on investor sentiment.
The FTSE 100 was down 0.46% at 7,213.45 while the second-tier index slipped 0.56% to 19,929.90. In parallel, the pound was off 0.47% against the US dollar to 1.256 and 0.56% lower versus the euro at 1.1395, after having surged on Friday, as European negotiators said at the weekend that Prime Minister Boris Johnson's Brexit plan was not good enough.
The EU's chief Brexit negotiator, Michel Barnier, said technical-level talks had been "constructive" but "a lot of work remains to be done".
Nonetheless, in a note sent to clients, analysts at JP Morgan told clients that the house view now was not as pessimistic as it had been and that its economists now saw even odds that Westminster could clinch a withdrawal deal with the European Union.
Normally, a weaker pound is good news for the FTSE 100, as around 70% of its constituents derive most of their earnings from abroad.
Yet Brexit caution and trade woes proved too much of a drag, with the mood souring further after a report that China wants to hold further talks with the US before signing US President Donald Trump's "phase one" deal on trade.
Bloomberg cited people familiar with the matter as saying that China wants more talks with the US as soon as the end of October to hammer out the details of the deal before president Xi Jinping agrees to sign it.
It was understood that Beijing could send a delegation led by Vice Premier Liu He, China’s top negotiator, to finalise a written deal that could be signed by both presidents at the Asia-Pacific Economic Cooperation summit next month in Chile.
US and Chinese negotiators agreed a limited trade deal on Friday whereby the US would suspend the tariff hike on $250bn of Chinese imports that was due to kick in on Tuesday in exchange for China buying between $40bn and $50bn in US farm products a year and being more open about how the value of its currency is set, among other measures.
The agreement was hailed by Trump as a "substantial phase one deal" and several Chinese media outlets - including the Global Times and Taoran Notes - agreed that a breakthrough had in fact been achieved.
Nonetheless, many analysts on both sides of the Pacific were cautious.
"We do not see a temporary truce as a market panacea. With the written agreement yet to be finalized, our economists note that much can change in the next 3-5 weeks, and remain cautious on a comprehensive deal anytime soon," analysts at Bank of America-Merrill Lynch told their clients.
Investors were also digesting weak data out of China, which showed that imports and exports fell more than expected in September.
In equity markets, miners retreated after the Chinese data, with Glencore, Anglo American and BHP all lower.
Ocado was hit by a downgrade to 'underweight' at JPMorgan, while Ferrexpo fell after saying it would "take any actions that are needed" in the interests of shareholders and the company over allegations surrounding chief executive and majority shareholder Kostyantin Zhevago.
Banks and housebuilders - which rallied on Friday amid hopes of a Brexit deal - were a tad weaker, retracing a bit of the previous Friday's surge . RBS, Barclays and Taylor Wimpey were all lower.
On the upside, cybersecurity company Sophos surged as it agreed to be bought by US private equity firm Thoma Bravo for $4bn (£3.2bn).
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "It’s been a rocky road for Sophos investors; the internet security business missed guidance repeatedly in 2018 and the shares took a pounding as a result. More recent results have stabilised the ship somewhat, but growth has been slower and investor confidence needs a lot of rebuilding.
"Against that background we suspect most investors will be reasonably happy with the offer, and with Sophos’ former private equity owner Apax already committed to backing the deal we see little chance of it failing to win shareholder support."
FTSE 100 - Risers
WPP (WPP) 956.60p 2.75%
Next (NXT) 6,584.00p 1.95%
Kingfisher (KGF) 214.10p 1.86%
Aveva Group (AVV) 3,772.00p 1.45%
Rolls-Royce Holdings (RR.) 754.20p 1.24%
Polymetal International (POLY) 1,154.50p 1.05%
JD Sports Fashion (JD.) 768.40p 1.00%
CRH (CRH) 2,737.00p 1.00%
AstraZeneca (AZN) 6,979.00p 0.91%
Spirax-Sarco Engineering (SPX) 7,620.00p 0.73%
FTSE 100 - Fallers
Evraz (EVR) 417.70p -3.87%
NMC Health (NMC) 2,604.00p -3.80%
Hargreaves Lansdown (HL.) 1,782.50p -3.37%
Auto Trader Group (AUTO) 522.60p -3.15%
Glencore (GLEN) 230.85p -2.80%
Prudential (PRU) 1,467.50p -2.72%
BHP Group (BHP) 1,675.00p -2.64%
United Utilities Group (UU.) 822.20p -2.56%
Anglo American (AAL) 1,935.00p -2.50%
Hiscox Limited (DI) (HSX) 1,566.00p -2.37%
FTSE 250 - Risers
Sophos Group (SOPH) 577.00p 35.61%
Brewin Dolphin Holdings (BRW) 328.00p 4.53%
Airtel Africa (AAF) 55.70p 4.11%
Sports Direct International (SPD) 309.80p 4.03%
FDM Group (Holdings) (FDM) 693.00p 3.43%
Elementis (ELM) 148.80p 3.33%
PayPoint (PAY) 890.00p 2.77%
Hochschild Mining (HOC) 184.00p 2.74%
Mediclinic International (MDC) 357.40p 2.61%
Avast (AVST) 380.20p 2.59%
FTSE 250 - Fallers
Rathbone Brothers (RAT) 2,310.00p -6.48%
Hunting (HTG) 403.60p -5.70%
Jupiter Fund Management (JUP) 316.10p -5.70%
Go-Ahead Group (GOG) 2,080.00p -4.94%
Finablr (FIN) 147.00p -4.55%
Kainos Group (KNOS) 467.00p -4.31%
OneSavings Bank (OSB) 359.40p -4.21%
Games Workshop Group (GAW) 4,592.00p -4.17%
Babcock International Group (BAB) 517.80p -4.04%
Future (FUTR) 1,206.00p -3.98%