London midday: Stocks drop into the red amid Brexit woes; Ferguson bucks trend
London stocks had fallen into the red by midday on Tuesday even as the pound languished at post-referendum lows.
The FTSE 100 was down 0.2% at 7,270.79. At the same time, the pound was steady against the dollar, having earlier dipped below $1.20 for the first time since 2017 after Prime Minister Boris Johnson said he would trigger a general election in October if lawmakers pass legislation later in the day to force a Brexit delay in the event of a no deal.
MPs are planning to put forward legislation forcing a delay until the end of January if Johnson is unable to reach a deal with the EU by mid-October.
Normally, a weaker pound would benefit the top-flight index as around 70% of its constituents derive most of their earnings from overseas. However, the currency's weakness was weighing on domestically-focused stocks on Tuesday.
Neil Wilson, chief market analyst at Markets.com, said sterling could fall to as low as $1.10 in the coming weeks.
"It’s set to be a day of tumult in Westminster as rebel Tory MPs collude with the opposition to take control of parliamentary business and force the government to take no-deal off the table.
"Boris Johnson appears likely to lose the vote, which should almost certainly mean he will call for an election, likely to be Oct 14th. What happens next? Two-thirds of MPs must vote for the election. Boris will need opposition votes. Labour may not wish to fall into this ‘elephant trap’, yet Corbyn is almost duty bound to agree to it as the official opposition leader."
"The continued political uncertainty will do nothing to lift sterling from its torpor. GBPUSD sank to the 1.19 handle in early trade, dropping to a low of 1.19697. There is more downside risk and very little to give bulls encouragement. A 1.18 handle is possible today as bears target the 1.19 round number. Ignoring the flash crash, we are very much in uncharted waters here. We could feasibly see 1.15 or even 1.10 in the coming weeks if traders decide to move against the pound."
Meanwhile, hot on the heels of Monday's disappointing reading on the UK manufacturing sector, investors were mulling the release of uninspiring construction data for August.
The Markit/CIPS construction purchasing managers’ index fell to 45.0 last month from 45.3 in July, led lower by the sharpest reduction in new work since March 2009 amid worries about Brexit. This was below expectations for an improvement to 46.5.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: "The sector fell deeper into contraction as continuing uncertainty and a weakened UK economy took a sizeable bite out of this month’s construction activity. Inevitably business confidence followed suit, dropping like a brick to its worst since December 2008 and close to the lowest depth seen in the previous recession.
"As Brexit creeps closer and confusion still reigns, this will undoubtedly heap more pressure on the UK Government to create much-needed clarity in the market. The commercial sector particularly has been devastated by reluctant clients fearful of taking a wrong turn in a confusing landscape and delaying project starts, resulting in the fastest drop in new orders since March 2009."
In equity markets, stocks with UK exposure weighed, with banks RBS and Lloyds and housebuilders Barratt Developments and Persimmon all lower.
Wagamama owner Restaurant Group was trading down after saying it swung to a first-half pre-tax loss of £87.7m from a profit of £12.2m the previous year as it took a hit from an exceptional pre-tax charge of £115.7m. Still, revenue surged nearly 60% and the company said trading remains in line with its expectations for the year.
On the upside, plumbing and heating products distributor Ferguson was the standout gainer as it revealed plans to spin off its UK operations and list them as Wolseley, as chief executive John Martin announced he would step down on November 19.
Market Movers
FTSE 100 (UKX) 7,270.79 -0.15%
FTSE 250 (MCX) 19,404.87 -0.39%
techMARK (TASX) 3,847.95 -0.08%
FTSE 100 - Risers
Ferguson (FERG) 6,330.73p 3.11%
NMC Health (NMC) 2,594.14p 1.53%
Coca-Cola HBC AG (CDI) (CCH) 2,786.00p 1.09%
Reckitt Benckiser Group (RB.) 6,496.00p 0.90%
Unilever (ULVR) 5,318.00p 0.89%
Aveva Group (AVV) 3,746.00p 0.81%
Relx plc (REL) 2,026.00p 0.75%
Diageo (DGE) 3,617.50p 0.74%
Flutter Entertainment (FLTR) 6,938.00p 0.73%
Sage Group (SGE) 705.80p 0.68%
FTSE 100 - Fallers
Auto Trader Group (AUTO) 510.80p -4.09%
Antofagasta (ANTO) 829.80p -3.04%
Smith (DS) (SMDS) 333.20p -2.46%
Royal Bank of Scotland Group (RBS) 182.00p -2.28%
Rightmove (RMV) 529.50p -2.27%
Morrison (Wm) Supermarkets (MRW) 180.83p -1.99%
Evraz (EVR) 485.60p -1.88%
Lloyds Banking Group (LLOY) 49.40p -1.83%
Marks & Spencer Group (MKS) 186.23p -1.78%
Just Eat (JE.) 762.80p -1.68%
FTSE 250 - Risers
Barr (A.G.) (BAG) 620.00p 5.26%
Acacia Mining (ACA) 271.00p 2.42%
Future (FUTR) 1,220.00p 2.18%
Centamin (DI) (CEY) 148.85p 1.95%
Hammerson (HMSO) 225.80p 1.71%
Aston Martin Lagonda Global Holdings (AML) 481.50p 1.71%
GVC Holdings (GVC) 658.00p 1.64%
CLS Holdings (CLI) 240.50p 1.48%
Syncona Limited NPV (SYNC) 232.82p 1.45%
Energean Oil & Gas (ENOG) 1,000.00p 1.42%
FTSE 250 - Fallers
Restaurant Group (RTN) 135.00p -12.45%
Kaz Minerals (KAZ) 379.00p -5.58%
Amigo Holdings (AMGO) 72.67p -4.88%
Intu Properties (INTU) 36.56p -4.32%
Ferrexpo (FXPO) 193.65p -4.28%
Coats Group (COA) 71.60p -4.21%
Galliford Try (GFRD) 570.50p -3.39%
B&M European Value Retail S.A. (DI) (BME) 349.70p -3.10%
McCarthy & Stone (MCS) 129.50p -2.78%
Vesuvius (VSVS) 453.60p -2.58%