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London close: FTSE finishes flat as ministers resign over Brexit

By Oliver Haill

Date: Thursday 15 Nov 2018

(Sharecast News) - London stocks gave up its earlier gains to finish flat on Thursday as the pound tumbled in the wake of Brexit Secretary Dominic Raab's resignation, with banks and housebuilders also hit by concerns about the EU divorce process.
The FTSE 100 closed up just over four points or 0.06% to 7,038.01, while the more domestically focused FTSE 250 index dropped 1.3% to 18,662.21.

Sterling tumbled 2% against the euro to 1.1265 and 1.9% versus the dollar 1.2750 -- suffering its worst drop in more than a year -- after Raab and fellow cabinet minister Esther McVey, along with a rash of junior ministers and aides, resigned less than a day after Prime Minister Theresa May's cabinet "collectively approved" a withdrawal agreement with the European Union.

Hard-right Brexiter Raab said in his resignation letter that he could not "in good conscience" support the deal, particularly over the proposed rules for Northern Ireland and the indefinite "backstop" arrangement that keeps it in the EU's customs and single market regimes.

There were also calls for a vote of no confidence in May, including from Jacob Rees-Mogg, leader of the backbench hard-Brexit supporting European Research Group. This led to worries about the potential for a general election, sparking a sell-off in various UK-focused sectors.

Data out mid-morning from the Office National Statistics was almost overlooked, even though it surprisingly showed retail sales dropping 0.5% last month versus expectations for a 0.2% increase, though September's decline was revised up to 0.4% from 0.8%.

But suffering more than retailers, shares in domestically focused banks all slumped, from RBS, Lloyds, Barclays to challengers CYBG and Metro, though rivals with a smaller reliance on the UK, HSBC and Standard Chartered, were in positive territory.

This was due to rising fears over a no-deal Brexit, said Joshua Mahony, market analyst at IG. "Lower interest rate hike expectations, coupled with the fear that a no-deal Brexit could bring chaos to trade, are raising worries over the performance of UK banks going forward."

As the pound dropped and investors sought safe havens, the yield on the benchmark 10-year Gilt slipped 13 basis points to 1.38%.

A no-deal Brexit could create major hurdles for banks and more importantly seriously damage the economy. Credit-default swaps insuring UK financial sector debt surged on Thursday levels in years, showing that traders are betting against banks' and insurers' creditworthiness. Furthermore, wobbles for May and the government could potentially lead to a general election and catapult the Labour Party's Jeremy Corbyn to power, something much feared by the City.

Fears about a Corbyn government and his party's plans for bringing water and energy companies back into public arms, hit the likes of Centrica, SSE, United Utilities and Severn Trent.

However, balancing out those areas of weakness, investors rushed for the reliability of gold and shifted cash into gold miners, sending Randgold Resources and Fresnillo toward the top of the pile.

Steelmaker Evraz was uppermost of all as it announced a third interim dividend, promising to disburse a total of $0.25 per share, while oil producers and sector service providers were lifted by a rally in crude prices, with Shell, BP and Wood Group all higher.

Housebuilders were also weighed by an update from Bovis Homes, which warned that uncertainty about Brexit had put off discretionary homebuyers.

George Salmon, equity analyst at Hargreaves Lansdown, said: "Brexit is proving to be a fly in the ointment. The housing market is already slowing, and the worry is it grinds to a halt in the event of a disorderly Brexit - which would clearly be bad news for the builders. A weak secondary market means around 15% ofBovis' transactions now rely on part-exchange, hardly reassuring. Overall, the sector looks something of a binary bet at the moment."

Elsewhere, Royal Mail slumped as it reported revenue up 1% but a 25% decline in operating profits for the first half of the year. Chief executive Rico Back said a range of actions had been put in place to improve performance and confirmed the board's commitment to cut £100m of costs and generate adjusted group operating profit before transformation costs of £500-550m for the financial year.

Capita tumbled a day after it emerged that the outsourcer had failed to deliver thousands of cervical cancer screening letters to patients as part of a contract with NHS England.

Bunzl, GlaxoSmithKline, Sainsbury, Marks & Spencer, Royal Dutch Shell, Dunelm, Genus, Sophos and Spire Healthcare were among the companies whose stock went ex-dividend.

Market Movers

FTSE 100 (UKX) 7,038.01 0.06%
FTSE 250 (MCX) 18,591.81 -1.68%
techMARK (TASX) 3,392.74 0.15%

FTSE 100 - Risers

Evraz (EVR) 547.00p 5.23%
Randgold Resources Ltd. (RRS) 6,300.00p 4.83%
Wood Group (John) (WG.) 664.00p 4.57%
Antofagasta (ANTO) 796.00p 4.49%
Fresnillo (FRES) 850.00p 3.94%
Smiths Group (SMIN) 1,430.00p 3.32%
Sage Group (SGE) 567.00p 3.24%
Scottish Mortgage Inv Trust (SMT) 485.80p 3.19%
BP (BP.) 527.00p 2.91%
BHP Billiton (BLT) 1,589.00p 2.85%

FTSE 100 - Fallers

Royal Bank of Scotland Group (RBS) 224.20p -9.63%
3i Group (III) 789.80p -8.16%
Taylor Wimpey (TW.) 149.95p -7.50%
Barratt Developments (BDEV) 505.40p -7.40%
Persimmon (PSN) 2,179.00p -7.36%
Severn Trent (SVT) 1,808.00p -6.80%
easyJet (EZJ) 1,167.00p -6.64%
Royal Mail (RMG) 325.40p -6.49%
Berkeley Group Holdings (The) (BKG) 3,426.00p -6.34%
ITV (ITV) 149.40p -5.89%

FTSE 250 - Risers

Centamin (DI) (CEY) 98.22p 5.12%
Spirent Communications (SPT) 121.00p 5.03%
Euromoney Institutional Investor (ERM) 1,300.00p 4.33%
Cairn Energy (CNE) 194.60p 3.95%
Fidelity China Special Situations (FCSS) 201.00p 3.50%
Ferrexpo (FXPO) 214.00p 3.33%
JPMorgan Emerging Markets Inv Trust (JMG) 815.00p 3.30%
Spirax-Sarco Engineering (SPX) 6,800.00p 3.19%
Templeton Emerging Markets Inv Trust (TEM) 687.00p 3.15%
BMO Global Smaller Companies (BGSC) 1,380.00p 2.99%

FTSE 250 - Fallers

Capita (CPI) 107.40p -14.59%
Countryside Properties (CSP) 279.60p -10.21%
Premier Oil (PMO) 85.45p -8.81%
OneSavings Bank (OSB) 352.40p -8.42%
Redrow (RDW) 523.00p -7.19%
Bovis Homes Group (BVS) 966.00p -7.16%
Workspace Group (WKP) 908.00p -7.11%
Paragon Banking Group (PAG) 406.40p -6.70%
Amigo Holdings (AMGO) 256.00p -6.21%
Drax Group (DRX) 387.00p -6.20%


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