London close: Stocks finish red as optimism for trade deal fades
London stocks remained below the waterline at the close on Thursday, amid concerns about a lack of progress in China-US trade talks, although British Gas owner Centrica bucked the trend on the back of a well-received trading statement.
The FTSE 100 ended the session down 0.33% at 7,238.55, while the FTSE 250 was 0.51% weaker at 20,369.86.
In currencies, the pound was last 0.09% weaker against the dollar at $1.2913, and was flat on the euro at €1.1671.
Late on Wednesday, Reuters reported that a phase one trade deal between the US and China might not be agreed this year.
However, there were also reports overnight that China’s top negotiator, Liu He, is "cautiously optimistic" about signing a phase one deal.
In addition, both chambers of the US Congress have passed a bill in support of pro-democracy protesters in Hong Kong, adding to concerns about tensions between the US and China.
“Trump’s likely signing of the Hong Kong bill raises the prospect that the US and China will find something other than trade to quarrel over,” said Chris Beauchamp, chief market analyst at IG.
“If the president was looking for an excuse to renew their trade spat then he has a tailor-made opportunity here to both hit China on trade and present himself as a champion of human rights and democracy.”
Beauchamp said that, for someone so devoted to his public image, especially now the impeachment hearings were piling on the pressure, the opportunity could be too big to pass up.
“Stock market indices continue to show signs of ‘rolling over’, with breadth mixed and volatility picking up once again.”
On home turf, data from the Office for National Statistics showed that public sector net borrowing hit its highest level in five years in October.
Excluding public sector banks, borrowing rose to £11.2bn from £8.9bn last October, versus consensus expectations of £9.3bn.
Over the year so far, borrowing was up 10.3% compared to the same period a year ago to £46.3bn.
“The worst October for the public finances for five years won’t prevent whoever wins the election embarking on a fiscal splurge,” said Andrew Wishart, UK economist at Capital Economics.
“Borrowing appears to have been higher than expected due to Brexit preparations, and leaves the budget deficit on track to rise for the first time in a decade this year.
“The investment plans laid out by the major parties suggest it will rise substantially further in 2020/21.”
He noted that department spending on staff and goods and services rose by £2.4bn compared to a year earlier.
“We suspect that reflects Whitehall preparing for a possible no deal Brexit at the end of the month," he said.
In equity markets, chemical company Johnson Matthey remained in the doldrums, losing 7.06% after it said half-year pre-tax profit declined 8% while net debt rose.
Royal Mail shares tanked by 14.2% after the company said its transformation programme was behind schedule, cut its interim dividend and warned of a "challenging" outlook for the letters business in the UK.
In the half year to 29 September, reported pre-tax profit rose to £173m from £33m the year before as revenue ticked up 5.1% to £5.2bn, with the company noting its best UK revenue performance in five years.
The group said strong growth in parcel revenues offset a drop in letter revenue.
However, on an adjusted basis, pre-tax profit fell to £146m from £183m and basic earnings per share slipped to 11.1p from 13.6p.
Royal Mail cut its interim dividend to 7.5p a share from 8.0p in 2018.
Industrial flow control equipment maker Rotork retreated 4.14% after saying it expects to deliver "moderately lower" sales year-on-year in 2019 on an organic constant currency basis.
Carnival was down 2.12% and B&M European Value Retail lost 3.07% after those stocks went ex-dividend.
On the upside, Centrica maintained its momentum and finished up 9.11%, after it backed its full-year guidance and increased its efficiency savings forecast by £50m to £300m.
British American Tobacco was up 3.86% and fellow cigarette peddler Imperial Brands was ahead 1.1%, following reports overnight that US regulators had abandoned plans to cut the level of nicotine in cigarettes.
Direct Line was in the green by 6.37% after a well-received third-quarter trading update late on Wednesday, with fellow insurer Admiral also higher by 1.63%.
FTSE 100 - Risers
Centrica (CNA) 79.32p 9.11%
British American Tobacco (BATS) 2,963.00p 3.57%
Kingfisher (KGF) 197.50p 1.80%
Admiral Group (ADM) 2,060.00p 1.63%
Hiscox Limited (DI) (HSX) 1,275.00p 1.51%
AstraZeneca (AZN) 7,336.00p 1.13%
Smith & Nephew (SN.) 1,670.50p 1.12%
Rightmove (RMV) 618.60p 1.11%
Coca-Cola HBC AG (CDI) (CCH) 2,426.00p 1.04%
Flutter Entertainment (FLTR) 8,580.00p 0.94%
FTSE 100 - Fallers
Johnson Matthey (JMAT) 2,989.00p -7.06%
Fresnillo (FRES) 598.60p -3.36%
Imperial Brands (IMB) 1,709.20p -2.94%
Evraz (EVR) 353.10p -2.91%
Bunzl (BNZL) 1,971.00p -2.33%
United Utilities Group (UU.) 851.20p -2.18%
Antofagasta (ANTO) 871.00p -2.13%
Carnival (CCL) 3,094.00p -2.12%
Ashtead Group (AHT) 2,277.00p -2.11%
Severn Trent (SVT) 2,293.00p -1.88%
FTSE 250 - Risers
Babcock International Group (BAB) 577.60p 6.69%
Direct Line Insurance Group (DLG) 292.20p 6.37%
Aston Martin Lagonda Global Holdings (AML) 475.00p 5.23%
Equiniti Group (EQN) 203.00p 3.57%
SSP Group (SSPG) 652.00p 3.16%
Synthomer (SYNT) 299.20p 2.61%
Rank Group (RNK) 232.00p 2.43%
IP Group (IPO) 59.00p 2.25%
Sanne Group (SNN) 578.00p 1.76%
Go-Ahead Group (GOG) 2,228.00p 1.64%
FTSE 250 - Fallers
Royal Mail (RMG) 198.45p -14.20%
Euromoney Institutional Investor (ERM) 1,224.00p -6.71%
UDG Healthcare Public Limited Company (UDG) 752.50p -5.29%
NewRiver REIT (NRR) 179.80p -5.27%
Mitchells & Butlers (MAB) 450.00p -4.36%
Rotork (ROR) 321.60p -4.14%
Balfour Beatty (BBY) 216.20p -3.83%
Sirius Minerals (SXX) 3.41p -3.78%
B&M European Value Retail S.A. (DI) (BME) 369.00p -3.76%
Ashmore Group (ASHM) 459.60p -3.24%