London midday: Stocks pare gains as housebuilders weigh
London stocks had pared earlier gains by midday on Monday despite growing optimism over Sino-US trade relations, hampered by weakness in the housebuilding sector and worries about Brexit.
The FTSE 100 was up 0.2% at 7,193.20, while the pound was 0.2% higher against the dollar at 1.3078 and 0.1% lower versus the euro at 1.1508.
There was some good news on the trade front after US President Trump said overnight that the 1 March deadline for the implementation of higher tariffs on Chinese imports will be delayed.
Trump tweeted: "I am pleased to report that the U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues.
"As a result of these very productive talks, I will be delaying the US increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement."
But investors were also reacting to an article from China’s state news agency, Xinhua, which stressed that talks between the two nations would prove more challenging in the final stages and were subject to unspecified "new uncertainties". It went on to say that the trade conflict will be "long-term, complex and difficult".
Meanwhile, worries about Brexit continued to weigh on investors’ minds as Prime Minister Theresa May delayed the meaningful vote on her deal until 12 March - just two weeks before the UK is set to leave the EU.
"This is a gamble that she hopes will buy her more time for negotiations," said London Capital Group analyst Jasper Lawler. "But she risks infuriating ministers who are already prepared to revolt against her."
To say business leaders were also frustrated was putting it mildly. CBI deputy director-general Josh Hardie said: “This is the latest signal to businesses that no deal is hurtling closer. It must be averted. Every day without a deal means less investment and fewer jobs created. That’s the cost of running down the clock, and it’s irresponsible to treat that as a price worth paying.”
In equity markets, miners - which are heavily dependent on demand from China - were the standout gainers, with Glencore and Antofagasta racking up healthy gains.
However, housebuilders were under the cosh as Persimmon tanked following a report that it could lose its right to sell Help to Buy homes. According to The Times, housing minister James Brokenshire is reviewing the company’s participation in the scheme following allegations of poor building standards and punitive leasehold charges, with the company receiving widespread criticism for the £500m pay package awarded to management last year.
Russ Mould, investment director at AJ Bell, said: "If these rumours prove accurate it would be a damaging blow for the company given that around 50% of the homes it built in 2018 were sold through the scheme.
"It’s not just Fairburn’s pay packet, and that of other senior directors at Persimmon, which is behind the scrutiny of the business. The company is also apparently under the microscope for build quality and for having homes with rising leasehold charges which makes them hard to sell on in the future.
"This shows the importance of paying more than lip service to good governance and corporate social responsibility. These things really matter and can have a significant impact on the success or failure of a company over the longer term.
"It also demonstrates the risks of being overly reliant on government support which can then be unilaterally withdrawn."
Peers Taylor Wimpey and Barratt Developments were also in the red.
Publisher Pearson was sharply lower as Berenberg said in a note that the company was "far from a turnaround" and profits are likely to decline in 2020.
Elsewhere, Associated British Foods was weaker as it said like-for-like sales at its Primark retail arm fell 2% in the first half of the year but full year guidance remained unchanged. At the top line, Primark grew sales 4% due to expansion of selling space, while the grocery, agriculture and ingredients divisions all reported improved revenues, while sugar sales have been strongly diluted by the new EU price regime.
Doorstep lender Provident Financial was on the back foot as it rejected a £1.3bn offer from smaller rival Non-Standard Finance, calling it "highly opportunistic", even though more than 50% of shareholders have already backed the offer.
Distribution group Bunzl retreated after saying it was stockpiling goods to mitigate against border delays if the UK crashed out of the European Union without a deal as it reported a rise in full year pre-tax profits.
Centamin tumbled as it reported a slump in full-year earnings, revenue and gold production.
Market Movers
FTSE 100 (UKX) 7,193.20 0.20%
FTSE 250 (MCX) 19,211.42 -0.30%
techMARK (TASX) 3,508.98 -0.18%
FTSE 100 - Risers
Prudential (PRU) 1,581.00p 3.00%
Melrose Industries (MRO) 178.15p 2.39%
GVC Holdings (GVC) 640.00p 1.91%
Glencore (GLEN) 314.75p 1.91%
Evraz (EVR) 560.60p 1.89%
Antofagasta (ANTO) 962.60p 1.75%
Standard Chartered (STAN) 619.20p 1.66%
InterContinental Hotels Group (IHG) 4,673.00p 1.65%
Standard Life Aberdeen (SLA) 239.40p 1.61%
Aviva (AV.) 431.30p 1.32%
FTSE 100 - Fallers
Persimmon (PSN) 2,325.00p -5.79%
Bunzl (BNZL) 2,431.00p -4.25%
Pearson (PSON) 864.80p -4.23%
Taylor Wimpey (TW.) 163.15p -2.63%
Associated British Foods (ABF) 2,274.00p -1.69%
Barratt Developments (BDEV) 565.80p -1.63%
Ocado Group (OCDO) 881.40p -1.59%
Rentokil Initial (RTO) 337.30p -1.52%
ITV (ITV) 132.20p -1.31%
Micro Focus International (MCRO) 1,844.50p -1.13%
FTSE 250 - Risers
Metro Bank (MTRO) 1,511.00p 5.66%
Fidelity China Special Situations (FCSS) 225.99p 3.43%
Playtech (PTEC) 418.80p 2.40%
Rotork (ROR) 290.30p 2.36%
Syncona Limited NPV (SYNC) 284.25p 2.25%
Investec (INVP) 498.20p 2.19%
BlackRock Smaller Companies Trust (BRSC) 1,332.20p 2.08%
Premier Oil (PMO) 75.55p 1.68%
Riverstone Energy Limited (RSE) 1,060.50p 1.39%
F&C Commercial Property Trust Ltd. (FCPT) 124.20p 1.31%
FTSE 250 - Fallers
Centamin (DI) (CEY) 108.95p -18.91%
IG Group Holdings (IGG) 549.50p -4.35%
Funding Circle Holdings (FCH) 358.95p -3.96%
Ascential (ASCL) 369.80p -3.80%
Stobart Group Ltd. (STOB) 154.00p -3.51%
Go-Ahead Group (GOG) 2,012.00p -3.18%
Vivo Energy (VVO) 132.04p -3.12%
Greencore Group (GNC) 195.70p -3.02%
Hochschild Mining (HOC) 198.15p -2.87%
Sophos Group (SOPH) 339.80p -2.47%