London midday: Stocks extend losses amid Italy, Spain uncertainty
Stocks in London fell further into the red by midday on Tuesday, playing catch-up to the heavy losses seen in Europe a day earlier amid political uncertainty in Italy and Spain.
The FTSE 100 was down 1.3% to 7,626.82, with sentiment wobbly ahead of fresh elections in Italy and as Spanish Prime Minister Mariano Rajoy faces a vote of confidence in his leadership at the end of week.
In currency markets, sterling was down 0.5% against the dollar at 1.3246 but up 0.2% versus the euro at 1.1470. Meanwhile, the single currency was trading at a six-and-a-half month low against the greenback, down 0.7% at 1.1550.
Fresh elections are now expected in Italy after President Sergio Matarella intervened on Sunday to block the populist coalition partners from installing a euro-sceptic as their choice for finance minister- news that sent Italy’s two year government bond yield back toward euro crisis highs, adding 50 basis points on Monday to 0.981%.
Meanwhile, in Spain, the opposition calls for a vote last week after a Spanish court handed down a ruling on a corruption case involving members of the ruling Partido Popular.
Joshua Mahony, market analyst at IG, said: "Italian political instability is very much front and centre of investor concern today, with stock markets across Europe in the red. Worries about the policies of a potential Five-star and League coalition have been replaced by fears the populist parties could make even further gains in new elections. The Italian President rejected the coalition’s proposed finance minister appointment on the basis of his Eurosceptic views.
"With the populist parties making great strides off the back of disenfranchised and dissatisfied Italians who wants a change from the status quo, we are likely to see any future election drive further gains for the Five-star and League parties, thus heightening the chance of a more radical upheaval. It comes as no surprise that we are seeing Italian markets suffer heavily, with the FTSE MIB hitting a 10-month low, and the two-year bond yield topping 2% for the first time since 2013."
In UK corporate news, RBS paced the decline on the top-flight index following reports that the government could sell off a hefty part of its 70% stake in the bank this week.
Dixons Carphone shares tumbled after the company said profits were down 24% in the past year and will drop more than 21% in the coming year as new chief executive Alex Baldock sees "plenty of hard work" ahead for the electricals retailer.
Vedanta was in the red as it was ordered to permanently close its Tuticorin copper smelter in India, where anti-expansion protestors were killed by police earlier in May.
GlaxoSmithKline slipped after it and Innoviva submitted a regulatory application to the Japanese Ministry of Health, Labour and Welfare for their single inhaler triple therapy for the treatment of patients with chronic obstructive pulmonary disease or COPD.
Old Mutual was in the red after saying it will proceed with the listing of its asset management business Quilter PLC following shareholder approval for the managed separation.
Standard Life fell as it said it plans to return £1.75bn to its shareholders following the sale of its UK and European insurance business to Phoenix Group.
Rolls-Royce retreated as it unveiled a new range of engines for aviation business, purpose built for Bombardier’s latest jets.
On the upside, precious metals miners Fresnillo and Randgold Resources shone in risk-averse trading, while Smiths Group rallied after it confirmed that it is in very early stage discussions about a potential combination of its medical division with Nasdaq-listed ICU Medial.
Serviced office provider IWG was also on the front foot as Prime Opportunities Investment said it had made a cash offer for the company that was rejected.
In broker note action, IAG was upgraded to ‘buy’ at AlphaValue, while Fresnillo was lifted to ‘outperform’ at BMO.
Ocado was cut to ‘equal-weight’ at Morgan Stanley and Workspace was downgraded to ‘hold’ at Deutsche Bank.
Market Movers
FTSE 100 (UKX) 7,626.82 -1.34%
FTSE 250 (MCX) 20,772.03 -1.60%
techMARK (TASX) 3,522.28 -1.02%
FTSE 100 - Risers
Fresnillo (FRES) 1,332.00p 2.66%
Smiths Group (SMIN) 1,764.50p 2.59%
Smurfit Kappa Group (SKG) 3,156.00p 1.54%
Randgold Resources Ltd. (RRS) 5,830.00p 1.25%
Intertek Group (ITRK) 5,464.00p 0.55%
Sky (SKY) 1,348.50p 0.19%
Evraz (EVR) 478.40p 0.00%
Diageo (DGE) 2,762.50p 0.00%
Rentokil Initial (RTO) 341.80p -0.09%
Paddy Power Betfair (PPB) 9,070.00p -0.11%
FTSE 100 - Fallers
Royal Bank of Scotland Group (RBS) 280.10p -3.31%
Barclays (BARC) 199.60p -3.20%
Micro Focus International (MCRO) 1,306.44p -3.19%
CRH (CRH) 2,650.00p -3.18%
NMC Health (NMC) 3,694.00p -3.10%
Prudential (PRU) 1,832.50p -3.07%
Aviva (AV.) 514.00p -2.80%
Sage Group (SGE) 664.40p -2.38%
ITV (ITV) 164.00p -2.35%
Hargreaves Lansdown (HL.) 1,925.00p -2.26%
FTSE 250 - Risers
IWG (IWG) 311.00p 2.20%
Pershing Square Holdings Ltd NPV (PSH) 1,042.00p 1.96%
Sirius Minerals (SXX) 34.44p 1.83%
Travis Perkins (TPK) 1,387.50p 1.61%
Bakkavor Group (BAKK) 200.00p 1.52%
Ultra Electronics Holdings (ULE) 1,640.00p 0.99%
PZ Cussons (PZC) 242.20p 0.92%
Tate & Lyle (TATE) 674.60p 0.57%
Sequoia Economic Infrastructure Income Fund Limited (SEQI) 110.50p 0.45%
Babcock International Group (BAB) 829.10p 0.42%
FTSE 250 - Fallers
Bank of Georgia Group (BGEO) 1,963.20p -36.94%
Dixons Carphone (DC.) 187.15p -19.82%
TI Fluid Systems (TIFS) 252.00p -5.26%
RPC Group (RPC) 759.00p -4.55%
Ferrexpo (FXPO) 217.96p -4.53%
Capita (CPI) 140.25p -4.53%
Pets at Home Group (PETS) 123.87p -4.49%
TBC Bank Group (TBCG) 1,600.00p -3.96%
SSP Group (SSPG) 639.50p -3.83%
Investec (INVP) 572.40p -3.77%