London midday: Stocks extend losses as sterling rallies on Johnson defeats
London stocks had fallen further into the red by midday on Thursday, underperforming European markets as sterling ticked above $1.23 following Prime Minister Boris Johnson's triple defeat in parliament.
The FTSE 100 was down 0.7% at 7,261.32, dragged lower by a stronger pound even as its European peers rallied on Sino-US trade optimism. Sterling got a lift after Johnson suffered a series of embarrassing defeats in parliament over votes to block a no-deal Brexit and an early election. The PM suffered another humiliating blow as his brother Jo quit as Tory MP, saying he was "torn between family and national interest".
The currency was trading up 0.7% against the dollar at 1.2337, having fallen below $1.20 earlier this week for the first time since 2017. Against the euro, it was 0.5% higher at 1.1162.
David Cheetham, chief market analyst at XTB, said the FTSE was "standing out like a sore thumb".
"The Eurostoxx50 and US stock futures are both trading at their highest level in just over a month and after a tumultuous August, investors may now be starting to feel that the worst of it is behind them and begin to hope for further upside ahead.
"The cause of this divergence is a further recovery in the pound with sterling now trading around 3% higher than Tuesday’s low against the USD, and quite remarkably the currency has now recouped around a quarter of the declines seen since the high seen at the start of May.
"The last couple of days since parliament returned from its summer recess have been dramatic, even against the high bar set by UK politics in recent years. After making his move last week by proroguing parliament, Boris Johnson is now on the back foot once more after MPs have voted to pass a bill that essentially significantly reduces the threat of a no-deal Brexit and thus renders his negotiating position with the EU as far weaker - at least in his own eyes."
The bill to block a no-deal Brexit could receive its final reading in the commons on Monday and be presented for royal assent.
Brexit shenanigans aside, there was some good news on the trade front as the US and China confirmed that both sides will meet next month to discuss trade, although some analysts remained sceptical.
Neil Wilson, chief market analyst at Markets.com, said the news should be taken with a good dose of salt.
"It wasn’t that long ago the market was rallying as we thought a deal imminent, now it’s moving on nothing more than confirmation of talks. It highlights the headline risk that traders must contend with and suggests there is very little by way of a strong trend in the markets right now, just a lot of short-termism and uncertainty. A trade deal is a long way away."
In equity markets, BHP Group was the worst performer as it urged shareholders to reject two resolutions that would force the miner to cut its ties with industry lobbying groups whose aims contradict the Paris climate change accord.
CYBG, the owner of Virgin Money and Clydesdale and Yorkshire Banks, was sharply lower after it warned late on Wednesday that it expects to increase its provision for legacy payment protection insurance costs by between £300m and £450m after a surge in claims ahead of the August deadline.
On the upside, turnaround specialist Melrose Industries was he standout gainer as it posted a rise in interim pre-tax profit thanks to a strong showing from its aerospace division and hiked its dividend by 10%.
Specialist media publisher Future surged after saying it expects full-year core earnings to be "materially ahead" of expectations, driven by trading in the US and forex benefits in the final quarter.
Redrow was in the green as it reported a 7% jump in annual pre-tax profit to £406m, while Dixons Carphone shares rose after it maintained its guidance for the year but posted a 10% decline in UK & Ireland mobile like-for-like revenue for the first quarter.
Market Movers
FTSE 100 (UKX) 7,261.32 -0.68%
FTSE 250 (MCX) 19,600.46 -0.10%
techMARK (TASX) 3,841.50 -0.81%
FTSE 100 - Risers
Melrose Industries (MRO) 197.65p 6.55%
NMC Health (NMC) 2,725.00p 4.97%
St James's Place (STJ) 965.80p 4.43%
ITV (ITV) 119.55p 2.71%
Royal Bank of Scotland Group (RBS) 188.50p 2.42%
Legal & General Group (LGEN) 229.60p 2.41%
Aviva (AV.) 362.50p 2.00%
Antofagasta (ANTO) 876.60p 1.84%
Taylor Wimpey (TW.) 150.75p 1.79%
Standard Life Aberdeen (SLA) 251.80p 1.45%
FTSE 100 - Fallers
BHP Group (BHP) 1,736.40p -3.88%
AstraZeneca (AZN) 7,158.52p -3.15%
Glencore (GLEN) 236.85p -2.47%
Compass Group (CPG) 2,088.00p -2.29%
Micro Focus International (MCRO) 1,082.50p -2.20%
GlaxoSmithKline (GSK) 1,708.40p -2.11%
Admiral Group (ADM) 2,052.00p -2.05%
Relx plc (REL) 1,959.00p -1.95%
Vodafone Group (VOD) 154.02p -1.87%
Diageo (DGE) 3,543.50p -1.84%
FTSE 250 - Risers
Future (FUTR) 1,316.00p 10.40%
Wood Group (John) (WG.) 376.30p 5.26%
Hunting (HTG) 470.80p 4.34%
Sports Direct International (SPD) 252.40p 3.78%
Cairn Energy (CNE) 178.70p 3.77%
Kaz Minerals (KAZ) 415.80p 3.74%
B&M European Value Retail S.A. (DI) (BME) 370.00p 3.50%
Tullow Oil (TLW) 215.20p 3.07%
Playtech (PTEC) 378.60p 2.63%
Wizz Air Holdings (WIZZ) 3,623.00p 2.40%
FTSE 250 - Fallers
CYBG (CYBG) 110.74p -20.87%
Network International Holdings (NETW) 571.00p -8.93%
Pagegroup (PAGE) 409.00p -4.31%
PureTech Health (PRTC) 279.90p -3.48%
Vivo Energy (VVO) 126.40p -3.36%
Polymetal International (POLY) 1,170.00p -3.19%
Hikma Pharmaceuticals (HIK) 1,985.00p -3.12%
Polypipe Group (PLP) 386.20p -2.92%
PayPoint (PAY) 901.00p -2.91%
Intu Properties (INTU) 34.90p -2.79%