London open: Stocks drop on Brexit woes after sterling falls to 18-month low
London stocks fell in early trade on Wednesday, taking their cue from weak US and Asian sessions as uncertainty about Brexit and US-China trade relations undermined sentiment.
At 0830 GMT, the FTSE 100 was down 1% at 6,949.69, while the pound was off 0.1% against the dollar at 1.2706 and 0.5% firmer versus the euro at 1.1200, having fallen to its lowest level this year against the greenback after the government lost three parliamentary votes, including two contempt of Parliament motions for not publishing the full legal advice on the withdrawal agreement.
In addition, MPs approved an amendment from Tory Dominic Grieve which aims to give them a greater say if Theresa May’s Brexit proposal is defeated during the meaningful vote next week.
Neil Wilson, chief market analyst at Markets.com, said: "The pound is on the ropes and looks set for more falls as it seems all but certain Theresa May's government will fall. A vote of no confidence and fresh general election now seem certainties after a humiliating day in parliament. The spectre of a no deal crash out looms, but equally there is building momentum behind a second referendum.
"In short this looks like a lot of short term trouble for GBP with a high risk of long term damage (no-deal exit), but with rising possibility of long term salvation from a second referendum, which Remain would carry. Worse before it gets better is the mantra for sterling."
Wilson suggested that if the pound fell below support at £1.266 it could fall back to 1.2360, while a rise above 1.27 "could bring on some short term gains".
As far as Sino-US trade relations are concerned, the Chinese Commerce Ministry said in a statement on its website that it was confident a trade agreement can be reached and that China would work to implement specific issues already agree as quickly as possible. The Commerce Ministry said the trade talks had been "very successful".
"We are confident in implementation...The economic and trade teams from both sides will actively promote the work of negotiations within 90 days in accordance with a clear timetable and road map," it said.
On the corporate front, Hargreaves Lansdown was the biggest faller on the FTSE 100 after a downgrade to 'underweight' at Morgan Stanley, while Rotork was the worst performer on the 250 after Morgan Stanley trimmed its target price, closely followed by CYBG, which dropped on the back of a downgrade to 'underperform' at Bank of America Merrill Lynch.
Weir and Wood Group were under pressure after the world's largest oilfield services provider, Schlumberger, warned on Tuesday that its fourth-quarter North America revenues were likely to drop by 15% sequentially due to steeper-than-expected price declines in hydraulic fracturing.
Wood Group was also in focus after it was awarded a $43m contract by an unnamed large-cap midstream company to construct 80 miles of steel pipeline in west Texas.
On the upside, Shire rallied as Takeda Pharmaceutical shareholders approved its £46bn takeover of the London-listed pharmaceutical group. Shire shareholders are due to vote on the deal later in the day.
Transport operator Stagecoach surged after its first-half numbers came in ahead of expectations and guidance was upgraded.
In other broker note action, Ted Baker was downgraded to 'hold' by HSBC on the back of the "forced hugging" scandal, while GlaxoSmithKline was cut to 'equalweight' at Barclays.
Market Movers
FTSE 100 (UKX) 6,949.69 -1.04%
FTSE 250 (MCX) 18,112.12 -1.19%
techMARK (TASX) 3,430.40 -0.65%
FTSE 100 - Risers
Shire Plc (SHP) 4,688.00p 3.03%
National Grid (NG.) 831.00p 0.05%
DCC (DCC) 6,060.00p 0.00%
Standard Life Aberdeen (SLA) 258.35p 0.00%
Paddy Power Betfair (PPB) 6,830.00p 0.00%
Smurfit Kappa Group (SKG) 2,108.00p 0.00%
Rolls-Royce Holdings (RR.) 856.20p -0.09%
Diageo (DGE) 2,843.00p -0.18%
Land Securities Group (LAND) 812.40p -0.27%
Severn Trent (SVT) 1,813.00p -0.36%
FTSE 100 - Fallers
Hargreaves Lansdown (HL.) 1,877.50p -5.13%
Scottish Mortgage Inv Trust (SMT) 485.30p -2.86%
GVC Holdings (GVC) 708.50p -2.81%
Ocado Group (OCDO) 807.02p -2.77%
Ashtead Group (AHT) 1,728.50p -2.67%
Melrose Industries (MRO) 170.55p -2.65%
Evraz (EVR) 479.80p -2.64%
Micro Focus International (MCRO) 1,506.64p -2.29%
Barclays (BARC) 155.48p -2.29%
Wood Group (John) (WG.) 638.28p -2.25%
FTSE 250 - Risers
Stagecoach Group (SGC) 164.40p 6.89%
Rank Group (RNK) 145.80p 2.39%
Ferrexpo (FXPO) 181.00p 1.09%
Morgan Advanced Materials (MGAM) 274.80p 1.03%
Thomas Cook Group (TCG) 22.95p 1.02%
Hochschild Mining (HOC) 167.50p 0.90%
Halfords Group (HFD) 287.00p 0.63%
Civitas Social Housing (CSH) 100.59p 0.59%
Mediclinic International (MDC) 344.67p 0.46%
Contour Global (GLO) 184.30p 0.44%
FTSE 250 - Fallers
Rotork (ROR) 246.98p -5.55%
CYBG (CYBG) 190.00p -5.00%
Kaz Minerals (KAZ) 557.11p -4.51%
Weir Group (WEIR) 1,429.00p -4.45%
Kier Group (KIE) 402.20p -4.28%
Vivo Energy (VVO) 117.00p -4.08%
Plus500 Ltd (DI) (PLUS) 1,413.00p -3.81%
FirstGroup (FGP) 87.07p -3.68%
Spirent Communications (SPT) 125.00p -3.25%
Capita (CPI) 101.65p -3.19%