London close: Stocks slip as Brexit deal hangs in the balance
London stocks dipped on Monday as investors digested a speech by Theresa May to business leaders, even as investors waited on the details of the long-term relationship being negotiated by Westminister and Brussels and kept track of Tory MPs calls for a leadership challenge.
The FTSE 100 was down 0.19% or 12.99 points to 7,000.89, while the pound was 0.07% higher against the dollar at 1.28372 but 0.19% lower against the euro to 1.1218 after May outlined at the annual Confederation of British Industry conference how industries would be protected under the Brexit plan, safeguarding free flowing trade for car makers and food providers.
May said Brexit was about "getting a good deal that unlocks the opportunity of a brighter future for this country and all our people". She also said that while immigration will continue to make a positive contribution to UK life, EU nationals will no longer be able to "jump the queue" ahead of people from other parts of the world. Instead, the UK immigration system will be "built around the talent and skills" a person has to offer.
John Allan, president of the CBI, gave his backing to May's plans, saying it would avoid "the wrecking ball" that would be a no-deal Brexit, while the organisation's director-general, Carolyn Fairbairn, said the PM's agreement "is not perfect. It is a compromise. But it is hard-won progress."
David Cheetham, chief market analyst at XTB, said: "Business leaders would no doubt prefer an agreement with more favourable terms but the majority seem to be behind this treaty as it at least would provide some clarity and alleviate the cloud of uncertainty that has hung overhead since the referendum back in 2016."
Chris Beauchamp at IG appeared to be in a similar frame of mind, telling clients: "Sterling too has recovered from losses earlier on in the day, as both Theresa May and Michel Barnier go on their charm offensives. Both the UK government and the EU Commission would quite like to get this done and dusted without any further wrangling, and it is heartening for markets to see both key players pushing the advantages of this deal, or indeed any deal. Given the fatigue with which most people are treating Brexit, it would be a relief to get it signed into reality."
Nevertheless, with the Brexit deal due to be approved by the EU on Sunday, before it was sent to the British Parliament, it remained to be seen whether the Conservative party grandees would collect the 48 letters necessary to trigger a vote of no-confidence in the PM.
According to The Sun, they had already collected 42.
On that note, in a research note sent to clients, analysts at Morgan Stanley said: "While the longer-term GBP outlook remains compelling, we are less constructive in the near term."
Analysts at the investment bank said they were keeping a close eye on the 1.2665 level for cable, followed by 1.2450 should that level fail to hold.
Mislav Matejka at JP Morgan appeared to be in a similar frame of mind, telling clients: "The proposed deal will go to the parliament for a vote over the next 2-3 weeks, but we expect it to fail, at least the first time around. The eventual passing of the deal, probably some time between mid-December and mid-January, will largely depend on things getting significantly worse from here in order for enough rebel MPs to fall back in line.
"This path is likely to flirt with any and all of the following along the way: no-deal, leadership challenge and new elections, with the material prospect of a Labour government."
Hence, for the moment it was still too early to re-enter domestic UK shares, Matejka said.
Housebuilders Barratt Developments and Persimmon were in the red, although Berkeley Group reversed early losses, as the latest Rightmove survey showed that house prices fell by 1.7% on the month in November versus a 1% increase in October. This marked the largest November drop since 2012, as new sellers priced their homes more realistically in the run-up to Christmas against a backdrop of stretched affordability and Brexit uncertainty.
On the year, house prices were down 0.2% compared to a 0.9% rise in September.
Rightmove said that while it is normal for seller asking prices to fall at this time of the year, cooling markets in the south and in the upper price sectors, along with political uncertainty, have resulted in new sellers lowering their asking price aspirations earlier than usual.
The biggest declines were seen in London, where the typical asking price dropped by 1.7%, or £10,793. Rightmove said this was not unexpected as the capital usually sees greater seasonal volatility tan the rest of the country.
Miles Shipside, Rightmove director and housing market analyst, said: "New sellers and their agents are reacting to market forces and lowering their pricing aspirations by more and sooner than usual. Stretched buyer affordability and the cooling markets in the south and in upper price brackets have combined with the ongoing political uncertainty to change pricing optimism into pricing realism."
Elsewhere, banks and retailers were on the rise following heavy losses last week, with B&Q owner Kingfisher and Lloyds Banking Group both firmer. In other sectors, miners were mostly in the green, while oil majors BP and Shell were as oil prices came under fresh selling pressure with Brent crude futures not far off $66 a barrel.
Babcock International was in the green as it played down a weekend report about a large write-down that the defence contractor will have to take to its accounts this week. After Sky News reported that a near-£100m hit will be taken on the value of its helicopter business, the FTSE 250 group emphasised that it does "not expect the net cash costs to be material".
Diploma rallied as it posted a 9% jump in full-year adjusted pre-tax profit and said it remains confident of further progress in the coming year.
CYBG was down as it announced that chief operating officer Debbie Crosbie was stepping down to take on the role of chief executive officer at TSB Bank and ahead of its full-year results the next day.
Intermediate Capital Group racked up strong gains again following well-received first-half results last week, as JPMorgan reiterated its 'overweight' stance on the stock and upped the price target to 1,450p from 1,440p.
Market Movers
FTSE 100 (UKX) 7,000.89 -0.19%
FTSE 250 (MCX) 18,540.09 -0.26%
techMARK (TASX) 3,377.31 -0.06%
FTSE 100 - Risers
Fresnillo (FRES) 894.20p 3.38%
Lloyds Banking Group (LLOY) 55.83p 2.44%
3i Group (III) 809.60p 1.79%
Severn Trent (SVT) 1,854.50p 1.70%
Vodafone Group (VOD) 155.82p 1.58%
Associated British Foods (ABF) 2,480.00p 1.31%
Pearson (PSON) 942.00p 1.25%
Anglo American (AAL) 1,724.00p 1.25%
Paddy Power Betfair (PPB) 7,290.00p 1.18%
Standard Chartered (STAN) 597.40p 1.17%
FTSE 100 - Fallers
Ashtead Group (AHT) 1,798.00p -4.26%
Johnson Matthey (JMAT) 2,877.00p -4.10%
Just Eat (JE.) 535.60p -3.82%
Smurfit Kappa Group (SKG) 2,226.00p -3.30%
Imperial Brands (IMB) 2,560.50p -2.96%
Ocado Group (OCDO) 750.00p -2.39%
Royal Mail (RMG) 308.70p -2.31%
Barratt Developments (BDEV) 491.90p -2.21%
Centrica (CNA) 142.20p -2.10%
Schroders (SDR) 2,488.00p -2.05%
FTSE 250 - Risers
Diploma (DPLM) 1,349.00p 4.17%
Amigo Holdings (AMGO) 269.90p 4.01%
Lancashire Holdings Limited (LRE) 610.00p 3.39%
OneSavings Bank (OSB) 350.00p 3.12%
Hochschild Mining (HOC) 163.70p 2.90%
TP ICAP (TCAP) 310.80p 2.78%
Big Yellow Group (BYG) 919.50p 2.57%
PZ Cussons (PZC) 227.00p 2.34%
Kaz Minerals (KAZ) 539.40p 2.31%
Indivior (INDV) 206.40p 2.03%
FTSE 250 - Fallers
UDG Healthcare Public Limited Company (UDG) 602.50p -6.30%
Hunting (HTG) 596.50p -4.18%
Petrofac Ltd. (PFC) 516.60p -4.12%
Games Workshop Group (GAW) 2,900.00p -3.51%
Cairn Energy (CNE) 179.10p -3.19%
Mediclinic International (MDC) 331.80p -3.01%
Hikma Pharmaceuticals (HIK) 1,688.00p -2.96%
On The Beach Group (OTB) 396.00p -2.93%
Energean Oil & Gas (ENOG) 609.00p -2.71%
Cranswick (CWK) 2,982.00p -2.68%