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London close: Stocks kick the week off lower amid political uncertainty

By Alexander Bueso

Date: Monday 22 Oct 2018

London close: Stocks kick the week off lower amid political uncertainty

(Sharecast News) - London stocks started the week on a down note despite a weaker pound, albeit on the back of heightened political uncertainty, even as investors continued to ponder the risk of another leg lower on Wall Street.

The FTSE 100 gave up early big gains to finish the day down by 0.10% or 7.0 points at 7,042.80, even as the pound fell 0.81% against the US dollar to trade at 1.29619 and 0.31% lower versus the euro to 1.1311, amid growing speculation that Prime Minister Theresa May could soon face a vote of no confidence.

Declines in the pound were fairly measured at present but, said David Cheetham, chief market analyst at XTB, the added uncertainty of the PM being ousted at such a critical time in Brexit negotiations could cause a swoon lower - particularly if May is replaced by former someone like Brexit secretary David Davis, who would likely push for a harder separation.

Backbench MPs had demanded that May appear before the 1922 Committee on Wednesday night with unrest growing amongst the Tories after reports last week the PM is considering an extension to the transition period. There were reports that 46 Tory MPs have sent letters of no confidence to the chairman of the influential committee, just short of the 48 needed to trigger a leadership contest.

For his part, Chris Beauchamp at IG said: "Once again a promising start for European markets has fizzled out once US trading gets underway. The world's most important market has looked across at the gains in Asia on hopes of Chinese intervention, and shrugged its shoulders.

"[...] In terms of looking for strength relative to the broader market, we have seen some early gains for Apple and Amazon in the US, and it is these that will likely lead the way higher. There are plenty of reasons to be worried at present, which continue to trump the cheaper valuations on offer in US markets. But in time the usual seasonal factors will prevail, and it is to the likes of the Nasdaq and US small caps that traders will turn to when a momentum-driven recovery becomes apparent."

Analysts at Morgan Stanley appeared to be of a broadly similar view to Beauchamp, telling clients on Sunday that recent price moves across asset classes remained more consistent will a 'bull market correction' rather than the start of a 'bear market'

But on a more cautious note, they added: "we have less confidence than in February that the latest price action is not the start of a full-blown bear market."

Investors were also keeping an eye on Italy after Moody's downgraded the country's credit rating on Friday to Baa3, one notch above "junk". After the EU rejected Italy's budget plan to lift the deficit to 2.4% of domestic output next year from 1.8% in 2018, the government responded on Monday to say it will adjust its fiscal policies if it risks falling short of its new deficit commitments.

Italian shares started sharply higher on Monday with government bonds rallying alongside, pushing yields lower, but by the close of trading advances in both had evaporated.

Back in London, miners put in a strong performance, with Anglo American, Antofagasta and Glencore all higher as metals prices rallied after Chinese officials promised to support the country's economy.

Offsetting those moves, oil stocks including BP and Cairn Energy retreated as crude oil futures were dragged lower by news of continued higher readings on activity in the US Permian basin and reports that Libya might be able to add several hundred thousands of barrels of oil per day in output towards the beginning of 2019.

In individual company news, Gulf region hospital operator NMC Health gave its shares a shot in the arm as it provided an improved set of revenue and earning guidance for this year and next.

Ryanair flew higher even as it posted a 7% drop in profit for the six months to 30 September, as its half-year numbers were broadly in line with expectations. EasyJet was also in the green.

Drug titan AstraZeneca was gained after it and partner Merck said results from a phase 3 clinical trial for their ovarian cancer treatment showed a reduction of disease progression or death by 70%.

Budget retailer B&M was on the front foot after announcing late on Friday that it had bought French chain Babou.

GVC Holdings, Paddy Power Betfair and William Hill were all under the cosh following a report over the weekend that Chancellor Philip Hammond will clamp down on offshore gambling companies in the Budget next week.

Department store chain Debenhams was also weaker following a report that it's preparing a radical overhaul of its 200-year-old business that will include reviewing its store portfolio and slashing its dividend to zero.

Defence company QinetiQ was little changed as it agreed buy 85% of Inzpire Group - which provides operational training and mission systems for military customers in the UK and internationally - with an agreement to acquire the rest after two years, for a total of £23.5m.

In broker note action, Fresnillo racked up strong gains after an upgrade to 'buy' at Bank of America-Merrill Lynch, while Hunting was upgraded to 'outperform' at Macquarie.

Rightmove and Man Group were both boosted to 'buy' at UBS. Ophir Energy and Tullow Oil were bumped up to 'buy' at Jefferies, but Cairn Energy was cut to 'underperform' and Convatec was downgraded by HSBC.

AIM-listed double glazing group Safestyle was lifted to 'buy' at Liberum.

Market Movers

FTSE 100 (UKX) 7,042.80 -0.10%
FTSE 250 (MCX) 18,758.22 -0.20%
techMARK (TASX) 3,309.21 -0.37%

FTSE 100 - Risers

NMC Health (NMC) 3,200.00p 5.61%
Royal Mail (RMG) 358.90p 4.21%
easyJet (EZJ) 1,104.00p 3.37%
Rightmove (RMV) 433.70p 2.69%
Burberry Group (BRBY) 1,709.50p 2.27%
British American Tobacco (BATS) 3,362.00p 1.89%
Anglo American (AAL) 1,663.20p 1.55%
Smurfit Kappa Group (SKG) 2,518.00p 1.53%
Direct Line Insurance Group (DLG) 328.10p 1.52%
Persimmon (PSN) 2,190.00p 1.30%

FTSE 100 - Fallers

Paddy Power Betfair (PPB) 6,485.00p -4.00%
Wood Group (John) (WG.) 710.00p -2.82%
Rentokil Initial (RTO) 295.50p -2.73%
GVC Holdings (GVC) 937.50p -2.34%
Vodafone Group (VOD) 149.56p -1.90%
Evraz (EVR) 514.60p -1.72%
Whitbread (WTB) 4,464.00p -1.57%
Mondi (MNDI) 1,783.00p -1.55%
Severn Trent (SVT) 1,856.50p -1.49%
Rolls-Royce Holdings (RR.) 860.40p -1.33%

FTSE 250 - Risers

Amigo Holdings (AMGO) 238.40p 7.45%
Avast (AVST) 295.30p 4.87%
B&M European Value Retail S.A. (DI) (BME) 402.10p 4.33%
Contour Global (GLO) 177.60p 3.92%
Ferrexpo (FXPO) 226.00p 3.86%
Man Group (EMG) 147.00p 3.67%
Games Workshop Group (GAW) 3,170.00p 3.43%
Thomas Cook Group (TCG) 41.84p 3.16%
Fidelity China Special Situations (FCSS) 197.40p 3.13%
Spirent Communications (SPT) 120.00p 3.09%

FTSE 250 - Fallers

Cairn Energy (CNE) 200.00p -6.63%
Premier Oil (PMO) 114.00p -5.79%
Go-Ahead Group (GOG) 1,559.00p -5.17%
Weir Group (WEIR) 1,474.00p -4.53%
Inchcape (INCH) 496.20p -3.84%
Dechra Pharmaceuticals (DPH) 2,244.00p -3.77%
Greencore Group (GNC) 187.85p -3.67%
Just Group (JUST) 72.70p -3.52%
William Hill (WMH) 218.70p -3.49%
Domino's Pizza Group (DOM) 257.90p -3.30%


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