London midday: Stocks fall further as trade deal hopes fade
London stocks had fallen further into the red by midday on Monday as optimism over a trade deal between the US and China faded, while worries about Brexit and uninspiring Chinese data also weighed on sentiment.
The FTSE 100 was down 0.7% at 7,195.16. The pound was off 0.8% against the dollar at 1.2562 and 0.4% lower versus the euro at 1.1417, having surged on Friday, after European negotiators said over the weekend that Prime Minister Boris Johnson's Brexit plan was not good enough.
The EU's chief Brexit negotiator, Michel Barnier, said technical-level talks had been "constructive" but "a lot of work remains to be done".
Neil Wilson, chief market analyst at Markets.com, said: "Sterling has softened as complicated Brexit negotiations have yet to produce a result. The lack of progress has just taken the shine off things a touch but the market remains ever hopeful and there’s support as long as talks are still going.
"The more Boris gives ground to the EU, the harder the sell to the European Research Group and Democratic Unionist Party. Labour seems all but certain to block whatever the government agrees with EU."
Normally, a weaker pound is good news for the FTSE 100, as around 70% of its constituents derive most of their earnings from abroad. However, Brexit and trade woes proved too much of a drag, with the mood souring further after a report that China wants to hold further talks with the US before signing US President Donald Trump's "phase one" deal on trade.
Bloomberg cited people familiar with the matter as saying that China wants more talks with the US as soon as the end of October to hammer out the details of the deal before president Xi Jinping agrees to sign it.
It was understood that Beijing could send a delegation led by Vice Premier Liu He, China’s top negotiator, to finalise a written deal that could be signed by both presidents at the Asia-Pacific Economic Cooperation summit next month in Chile.
US and Chinese negotiators agreed a limited trade deal on Friday whereby the US would suspend a tariff hike on $250bn of Chinese imports that was due to kick in on Tuesday in exchange for China buying between $40bn and $50bn in US farm products and being more open about how the value of its currency is set.
The agreement was hailed by Trump as a "substantial phase one deal".
David Cheetham, chief market analyst at XTB, said: "The deal itself was fairly underwhelming when announced late on Friday with an increase in agricultural purchases and the avoidance of a marginal increase in the rate of levies seen as the bare minimum expected from the markets.
"The failure to even get this agreed upon is worrying and seeing as this is 'phase one' of Trump’s self- proclaimed big deal, there are now serious doubts as to whether phases two and three will ever even get off the ground."
Investors were also digesting weak data out of China, which showed that imports and exports fell more than expected in September.
In equity markets, miners retreated after the Chinese data, with Glencore, Anglo American and BHP all lower.
Ocado was hit by a downgrade to 'underweight' at JPMorgan, while Ferrexpo fell after saying it would "take any actions that are needed" in the interests of shareholders and the company over allegations surrounding chief executive and majority shareholder Kostyantin Zhevago.
Banks and housebuilders - which rallied on Friday amid hopes of a Brexit deal - were weaker. RBS, Barclays, Persimmon and Taylor Wimpey were all lower.
On the upside, cybersecurity company Sophos surged as it agreed to be bought by US private equity firm Thoma Bravo for $4bn (£3.2bn).
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "It’s been a rocky road for Sophos investors; the internet security business missed guidance repeatedly in 2018 and the shares took a pounding as a result. More recent results have stabilised the ship somewhat, but growth has been slower and investor confidence needs a lot of rebuilding.
"Against that background we suspect most investors will be reasonably happy with the offer, and with Sophos’ former private equity owner Apax already committed to backing the deal we see little chance of it failing to win shareholder support."
Market Movers
FTSE 100 (UKX) 7,195.16 -0.72%
FTSE 250 (MCX) 19,737.75 -1.52%
techMARK (TASX) 3,835.46 -0.33%
FTSE 100 - Risers
Polymetal International (POLY) 1,160.50p 1.58%
Sage Group (SGE) 703.40p 1.50%
Fresnillo (FRES) 639.40p 1.36%
WPP (WPP) 941.00p 1.07%
Kingfisher (KGF) 211.90p 0.81%
Diageo (DGE) 3,231.00p 0.65%
AstraZeneca (AZN) 6,957.00p 0.59%
JD Sports Fashion (JD.) 764.43p 0.48%
GlaxoSmithKline (GSK) 1,680.80p 0.35%
Unilever (ULVR) 4,658.00p 0.24%
FTSE 100 - Fallers
NMC Health (NMC) 2,593.00p -4.25%
Hargreaves Lansdown (HL.) 1,775.00p -4.18%
Evraz (EVR) 418.00p -3.80%
Lloyds Banking Group (LLOY) 57.23p -3.21%
Prudential (PRU) 1,463.50p -2.98%
Aviva (AV.) 394.10p -2.74%
International Consolidated Airlines Group SA (CDI) (IAG) 485.90p -2.61%
Glencore (GLEN) 231.55p -2.51%
Ashtead Group (AHT) 2,121.00p -2.48%
Anglo American (AAL) 1,937.00p -2.40%
FTSE 250 - Risers
Sophos Group (SOPH) 578.80p 36.03%
Avast (AVST) 382.60p 3.24%
PayPoint (PAY) 893.00p 3.12%
Hochschild Mining (HOC) 184.20p 2.85%
Brewin Dolphin Holdings (BRW) 319.40p 1.78%
FDM Group (Holdings) (FDM) 681.00p 1.64%
TBC Bank Group (TBCG) 1,234.00p 1.15%
Energean Oil & Gas (ENOG) 935.00p 0.86%
PureTech Health (PRTC) 248.00p 0.81%
Genus (GNS) 3,022.00p 0.73%
FTSE 250 - Fallers
Hunting (HTG) 394.91p -7.73%
Vivo Energy (VVO) 117.60p -7.55%
Jupiter Fund Management (JUP) 312.50p -6.77%
Aston Martin Lagonda Global Holdings (AML) 425.60p -6.46%
4Imprint Group (FOUR) 2,879.00p -6.22%
OneSavings Bank (OSB) 355.60p -5.22%
Rank Group (RNK) 196.00p -5.08%
Syncona Limited NPV (SYNC) 227.48p -4.82%
Sanne Group (SNN) 541.00p -4.42%
Games Workshop Group (GAW) 4,587.10p -4.36%