London midday: Stocks drop as trade worries persist; housebuilders buck trend
London stocks had fallen further into the red by midday on Wednesday as investors mulled a deterioration in UK business optimism, the possibility of President Trump slapping more tariffs on China and the resumption of trade talks between the US and Canada.
The FTSE 100 was down 0.5% to 7,423.96, while the pound was off 0.3% versus the dollar at 1.2814 and 0.3% lower against the euro at 1.1064.
Canadian foreign minister Chrystia Freeland is due to meet US trade representative Robert Lightizer in Washington later on Wednesday after the US and Canada failed to agree a trade deal last Friday, which was the original deadline. Canadian PM Justin Trudeau reiterated on Tuesday that the country would not sign a deal that would be inherently against its economic interests.
Oanda analyst Craig Erlam said: "Trump has threatened to tear up the agreement and replace it with a bilateral deal with Mexico if Canada doesn’t agree to the concessions that the US is demanding, which would likely be damaging for both countries should Congress support the decision, but prove to everyone else that he isn’t bluffing. That obviously isn’t the desirable outcome but as long as others believe it’s on the table, he may well draw at least some of the concessions he’s looking for."
This week could also see President Trump confirm the threatened 25% tariffs on another $200bn of Chinese imports over the next day or two, a move that has been criticised by many but seen by the White House as being necessary to address the trade deficit.
"Trump may have been aiming to get NAFTA over the line ahead of the mid-terms but I think he’s in this one for the long run and the Chinese don’t appear to be in any mood to back down, even if they aren’t able to respond with the same volume of tariffs," said Erlam.
Closer to home, UK services data revealed that activity in the sector picked up to its second-highest level since February last month thanks to improved business conditions, although the reading for business optimism hit one of its lowest level since the 2016 EU referendum.
IHS Markit's services sector purchasing managers' index rose to 54.3 in August from 53.5 in July, beating expectations for a reading of 53.9.
However, business expectations for the year ahead slumped, down across all three sectors, largely on the back of increased concern over Brexit negotiations.
"Given the increasingly unbalanced nature of growth and the darkening business mood, risks to the immediate outlook seem tilted to the downside," said Chris Williamson, chief business economist at IHS Markit.
Meanwhile, a survey by NatCen Social Research showed that fewer than one in five voters now expects Britain to secure a good Brexit deal, with as many as 59% of respondents saying they would vote Remain in another referendum. "This is by far and away the highest the level of support for Remain that we have recorded," it said.
In corporate news, BHP Billiton edged lower as it agreed to buy Guyana Goldfields' 6.1% interest in SolGold, the majority owner and operator of the Cascabel porphyry copper-gold project in Ecuador, for 26.592p a share.
Housebuilders bucked the trend, with Barratt Developments up after saying it aims to build 3-5% more houses over the coming years at higher margins and posting a 9.2% jump in full-year pre-tax profit to £835.5m.
Berkeley was also on the front foot as it said pricing has remained robust in the first four months of the year but added that the market "lacks urgency", while London remains constrained by high transaction costs, restrictive income multiple limits on mortgage borrowing and economic uncertainty.
William Hill rallied after saying it has teamed up in the US with casino group Eldorado Resorts as exclusive partner in the provision of digital and land-based sports betting services as well as online gaming.
Whitbread was lifted to 'neutral' by Bank of America Merrill Lynch following its agreement last week to sell the Costa coffee chain to Coca-Cola. Antofagasta was upgraded to 'equalweight' by Morgan Stanley, while BP was upped to 'overweight' by MS and Wizz Air was initiated at 'equalweight'.
Vodafone was boosted to 'outperform' at Bernstein, while Peel Hunt downgraded Footasylum to 'sell' but upped Restaurant Group to 'reduce'.
Market Movers
FTSE 100 (UKX) 7,423.96 -0.45%
FTSE 250 (MCX) 20,491.23 -0.28%
techMARK (TASX) 3,478.50 -0.53%
FTSE 100 - Risers
Royal Mail (RMG) 470.70p 2.68%
3i Group (III) 925.00p 1.76%
Royal Bank of Scotland Group (RBS) 250.10p 1.46%
Glencore (GLEN) 314.90p 1.25%
Lloyds Banking Group (LLOY) 61.07p 1.19%
GVC Holdings (GVC) 1,105.00p 0.82%
Smurfit Kappa Group (SKG) 3,226.00p 0.81%
Standard Chartered (STAN) 637.90p 0.77%
International Consolidated Airlines Group SA (CDI) (IAG) 700.80p 0.72%
Paddy Power Betfair (PPB) 7,065.00p 0.71%
FTSE 100 - Fallers
Coca-Cola HBC AG (CDI) (CCH) 2,571.00p -3.31%
Burberry Group (BRBY) 2,144.00p -2.55%
Ocado Group (OCDO) 1,046.00p -2.33%
NMC Health (NMC) 3,802.00p -1.86%
Shire Plc (SHP) 4,410.00p -1.81%
Rolls-Royce Holdings (RR.) 983.24p -1.68%
Unilever (ULVR) 4,289.00p -1.56%
Evraz (EVR) 489.60p -1.41%
TUI AG Reg Shs (DI) (TUI) 1,389.00p -1.38%
Imperial Brands (IMB) 2,692.00p -1.21%
FTSE 250 - Risers
Alfa Financial Software Holdings (ALFA) 159.40p 7.70%
William Hill (WMH) 263.10p 5.88%
Charter Court Financial Services Group (CCFS) 359.60p 3.69%
Redrow (RDW) 562.00p 3.12%
Go-Ahead Group (GOG) 1,651.00p 2.36%
Inmarsat (ISAT) 535.20p 2.33%
IWG (IWG) 242.70p 2.19%
OneSavings Bank (OSB) 418.20p 2.15%
AA (AA.) 112.30p 2.09%
Bakkavor Group (BAKK) 187.80p 2.07%
FTSE 250 - Fallers
Sirius Minerals (SXX) 32.78p -5.21%
Centamin (DI) (CEY) 93.90p -3.51%
Vietnam Enterprise Investments (DI) (VEIL) 441.03p -3.07%
Thomas Cook Group (TCG) 79.70p -2.75%
Contour Global (GLO) 215.20p -2.62%
Games Workshop Group (GAW) 3,485.00p -2.52%
PZ Cussons (PZC) 231.40p -2.36%
UDG Healthcare Public Limited Company (UDG) 693.50p -2.32%
Cineworld Group (CINE) 303.00p -2.32%
Ascential (ASCL) 424.80p -2.30%