London midday: Stocks extend losses as sterling surges on draft Brexit text
London stocks had fallen further into the red by midday on Thursday as the pound surged on reports that UK and European Union negotiators have agreed a draft text of post-Brexit ties.
The FTSE 100 was down 1.1% to 6,976.48 as the pound rallied 0.8% against the dollar to 1.2874 and 0.5% versus the euro to 1.1280 after a leaked copy of the document indicated that the post-Brexit relationship may be quite similar to the existing one, with a "deep" customs cooperation and a commitment to build on a "single customs territory".
The text, which appeared to have five pages and some more positive language added since it was shown to Theresa May's Cabinet on Tuesday, promises a "broad deep and flexible partnership across trade and economic cooperation" as well as "respecting the result of the 2016 referendum" insofar as enabling Britain to develop an independent trade policy and end free movement of people with the EU.
The declaration set out other political intentions including "respecting the result of the 2016 referendum" insofar as enabling Britain to develop an independent trade policy and end free movement of people with the EU.
Analyst David Cheetham at XTB said the deal "appears that the relationship may more closely resemble the existing one than previously thought" and some of the passages about "deep" cooperation inspired traders to rushed and buy the pound.
"Overall these comments appear to be a case of the EU supporting Theresa May’s deal and throwing their weight behind it...and given the recent negativity around Brexit there’s plenty of scope for a relief rally should this move gain traction."
The news came amid reports that Theresa May was planning another trip to the Belgian capital on Saturday for more talks ahead of the crunch summit of EU leaders on Sunday.
Banks and housebuilders rallied on the news, with Barratt Developments, Taylor Wimpey, Persimmon and RBS all firmer.
However, this was not enough to offset the losses caused by a stronger pound, which tends to dent the top-flight index as around 70% of its constituents derive most of their earnings from abroad.
In corporate news, British Gas owner Centrica tumbled as it warned that full year financials would be dented after weaker energy production volumes and the loss of 372,000 home energy supply accounts in the third quarter, though it still expects to hit its full year targets.
While full year guidance for operating cash flow, net debt, efficiencies and dividends remained unchanged, the FTSE 100 group said its results will be affected by outages in the recent quarter at its Spirit Energy exploration and production joint venture, and at its nuclear division.
Russ Mould, investment director at AJ Bell, said: "The tough competitive environment is reflected in the 372,000 customers lost in the four months to the end of October, although this is not as alarming as the 823,000 lost in the same period in 2017.
"The company has delivered some significant cost savings and appears to be keeping a lid on its borrowings, however only a return to growth would really reassure on the sustainability of the dividend.
"Centrica is somewhat unusual in the utilities space given its material oil and gas production arm. While this does provide some diversification from the consumer energy business, it also comes with its own headaches attached, such as output recently being hit by operational issues."
Severn Trent was in the red even as the water company reported a 4.3% rise in first-half underlying pre-tax profit and said it was on track for its biggest year of capital spend in a decade.
Rotork suffered heavy losses as it reported a 4% drop in third-quarter order intake but said expectations for the full year were unchanged.
Precious metals miner Fresnillo was a big faller after being cut to ‘underweight’ at Morgan Stanley, while Halma was also downgraded to ‘equalweight’ and Spirax-Sarco was downgraded to ‘equalweight’ by the US bank. B&Q owner Kingfisher was another loser as it was cut to ‘hold’ at HSBC and to ‘sell’ at Societe Generale.
A large weight on the blue chip indices came from companies going ex-dividend, with the number including Carnival, DCC, Evraz, Imperial Brands, National Grid, Vodafone, 3i Infrastructure, B&M European Value Retail, Great Portland Estates, HICL Infrastructure, Tate & Lyle and Worldwide Healthcare Trust.
On the upside, betting group GVC Holdings rose after saying it had bought Australian peer Neds International for up to AUD $95m (£52m).
Just Eat was boosted by an upgrade to ‘neutral’ at JPMorgan and Royal Mail was up after an upgrade to ‘sector perform’ at RBC Capital Markets.
Hill & Smith was on the rise as it posted a jump in revenue for the period from 1 July to 31 October and said full-year 2018 results should be in line with market expectations.
Equiniti rallied as the technology and payments specialist said 2018 results are likely to be at the upper end of market expectations following "encouraging" organic revenue momentum into the second half, with continuing revenue tailwinds.
Market Movers
FTSE 100 (UKX) 6,976.48 -1.05%
FTSE 250 (MCX) 18,502.71 -0.44%
techMARK (TASX) 3,406.62 -0.64%
FTSE 100 - Risers
Just Eat (JE.) 590.20p 2.71%
Taylor Wimpey (TW.) 151.75p 2.53%
Barratt Developments (BDEV) 506.60p 2.47%
Royal Mail (RMG) 324.70p 2.46%
Royal Bank of Scotland Group (RBS) 221.28p 2.21%
Persimmon (PSN) 2,144.00p 2.05%
GVC Holdings (GVC) 790.50p 1.93%
Burberry Group (BRBY) 1,787.50p 1.88%
easyJet (EZJ) 1,155.00p 1.81%
Berkeley Group Holdings (The) (BKG) 3,470.32p 1.80%
FTSE 100 - Fallers
Fresnillo (FRES) 813.80p -10.83%
Centrica (CNA) 135.92p -6.74%
Evraz (EVR) 490.40p -6.13%
Halma (HLMA) 1,276.00p -5.48%
Imperial Brands (IMB) 2,456.50p -4.58%
Smurfit Kappa Group (SKG) 2,186.00p -4.54%
Johnson Matthey (JMAT) 3,000.00p -4.49%
WPP (WPP) 830.60p -3.75%
Anglo American (AAL) 1,637.24p -3.60%
Kingfisher (KGF) 231.70p -2.97%
FTSE 250 - Risers
Hill & Smith Holdings (HILS) 1,170.00p 4.46%
Equiniti Group (EQN) 227.00p 3.18%
Brewin Dolphin Holdings (BRW) 330.80p 3.05%
Provident Financial (PFG) 599.00p 2.82%
Superdry (SDRY) 755.45p 2.78%
BCA Marketplace (BCA) 219.00p 2.34%
IP Group (IPO) 115.20p 2.31%
TI Fluid Systems (TIFS) 192.90p 2.28%
Thomas Cook Group (TCG) 46.00p 2.22%
Bovis Homes Group (BVS) 943.00p 2.12%
FTSE 250 - Fallers
Rotork (ROR) 252.00p -11.27%
Ferrexpo (FXPO) 204.20p -4.58%
Spirax-Sarco Engineering (SPX) 6,040.00p -4.43%
Kier Group (KIE) 755.00p -4.43%
Keller Group (KLR) 599.00p -3.70%
Genesis Emerging Markets Fund Ltd Ptg NPV (GSS) 627.00p -3.24%
CYBG (CYBG) 200.40p -3.00%
Baillie Gifford Japan Trust (BGFD) 745.00p -2.99%
Riverstone Energy Limited (RSE) 1,153.40p -2.91%
Premier Oil (PMO) 75.65p -2.83%