Sterling rally weighs FTSE 100 down as Brexit and growth anxieties dominate

04 Dec, 2018

The FTSE 100 fell 0.4 percent by 0940 GMT, tracking losses in global stocks as investors' optimism on a deal between US President Donald Trump and Chinese President Xi Jinping to delay tariffs evaporated.

A jump in sterling also weighed the exporter-heavy index down. The currency rose as much as 0.9 percent after an adviser to the European Union's highest court said Britain should be allowed to unilaterally revoke its departure notice.

Investors were on tenterhooks as the British parliament began five days of debates on Prime Minister May's Brexit deal ahead of a crucial Dec 11 vote.

"We're fairly neutral on the UK, but we're playing it mainly through passive exposure - because you get the benefit of the currency if it weakens," said Rory McPherson, investment director at Psigma Investment Management.

Mining stocks Antofagasta, Glencore, Anglo American, were among the biggest weights on the FTSE 100, falling 1.7 to 2.6 percent as copper prices eased back on doubts over how fragile a trade truce struck at the G20 on Saturday was.

Randgold Resources and Fresnillo rose 1.5 percent and 1 percent respectively as the gold miners benefited from investors' bid for gold, considered a safer store of value in volatile markets.

Gold prices climbed to over a one-month high as the dollar slipped.

A rare gainer, Rightmove shares climbed 2.5 percent after Deutsche Bank upgraded the stock to "buy" from "hold".

Analysts at the bank said shares in the property listings website have overreacted this year to fears about competition and the UK economy.

"The stock sold off recently partly on Brexit concerns, however we remind investors that Rightmove revenue streams are not directly impacted by number of housing transactions or selling prices," they wrote.

Energy shares were a bright spot, with oil majors BP and Shell rising percent after oil prices climbed more than 1 percent ahead of expected output cuts by producer cartel OPEC.

Thomas Cook shares sank 14.5 percent to hit their lowest level in six years.

The tour operator and travel company has sunk in the past week since its second profit warning in as many months. Its credit default swaps have also soared on mounting concerns over its debt.

Shares in construction and engineering firm Kier fell 9 percent after Canaccord Genuity cut its rating on the stock to "hold" from "buy" after the company's recently announced rights issue.

"After fees, a worse than previously assumed working capital outflow and confirmation of the average debt level using daily averages, the annualised benefit from the rights issue is arguably only around 90 million pounds," the analysts wrote.

Ted Baker fell a further 6.3 percent, extending its losses from Monday when an employee petition criticising the CEO's policy of hugging sent the stock down 15 percent.

Consort Medical shares plunged 21 percent after the pharmaceutical firm's full-year pre-tax profit was dented by about 3 million pounds due to delays with Mylan in their Wixela drug programme.

The stock was set for its worst day in a quarter-century.

Overall, analysts are downgrading their estimates of domestic UK stocks' earnings at the fastest rate since the Brexit vote of June 2016.

"We feel there's better trades to be had than being exposed to UK domestics. It could be a fantastic trade if we get a good deal, but at the moment they're very beaten down," said Psigma's McPherson.

Copyright Reuters, 2018
 

 

 

 

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