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London close: Heavyweight HSBC drags as investors prove hard to impress
London stocks fell less than one point on Tuesday, as solid results from HSBC and BHP Billiton failed to please demanding investors but currency traders were more taken in by Brexit reports.
The FTSE 100 closed 0.89 points or just 0.012% lower at 7,246.77, while the pound recovered from earlier losses against the dollar to climb to a flat 1.4002 and gained 0.6% versus the euro to 1.1350.
Sterling was tickled green by a vivid speech by Brexit secretary David Davis in Vienna, where he painted an optimistic picture to Austrian business leaders and denied that the Tories will plunge Britain into a "Mad Max-style world borrowed from dystopian fiction".
More sceptical observers wondered if perhaps there were other dystopian futures being planned instead, but not according to another report that emerged suggesting the EU parliament had prepared a 60-page Brexit proposal that which would see the UK given special associate status and raised the likeliness of a bespoke deal.
"While the internationally focused FTSE 100 has moved lower given the negative impact of a strong pound on internationally located firms, the positive implications of today's Brexit breakthrough seems to have been better reflected on the domestically focused FTSE 250 index," noted IG analyst Joshua Mahony.
David Cheetham at XTB added that these latest developments reveal some "possible cracks" in the EU's hardline approach and "are the clearest sign yet that the bloc may accept preferential terms as far as trade is concerned post-Brexit".
UK manufacturing data out from the Confederation of British Industry in the morning showed growth slowed more than expected as the boost from a weakening pound starts to fade.
The CBI's order balance dropped to +10 from +14 in January, short of the +11 expected, and marking a four-month low but still well above the long-run average of -14.
Meanwhile, the balance of export orders came fell to +10 from +19 the month before and the balance of output expectations declined to +16 from +24. Volume of output in the last three months came in at +24 compared to +21.
The selling prices balance fell to +25 in February from +40 the previous month, but remained well above its 30-year average of +16.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The further decline in the CBI's total orders balance in February indicates that the support to growth in manufacturing output from sterling's depreciation is beginning to fade."
He added that the boost to growth from sterling's depreciation will continue to fade as this year progresses.
In corporate news, heavily-weighted HSBC was under the cosh as its growth in full-year profits still missed City expectations.
"Markets were largely unimpressed by the latest HSBC earnings, with the bank's 141% rise in pre-tax profits undershooting market expectations," said Mahony. "Interestingly, we are starting to see the impact of Carillion's recent demise, with HSBC seemingly taking a $500 million hit on 'two large corporate exposures in Europe', thought to be Carillion and Steinhoff."
Also, despite delivering solid results mining giant BHP Billiton was also under pressure as its interim profit grew 25% but fell short of analysts' forecasts, with a bumper dividend still not enough to please investors.
InterContinental Hotels was also in the red despite reporting a jump in full-year profit. It lost a few short-termist supporters after saying it will not be paying out any additional capital this year as it looks to reinvest savings in growth.
Home furnishings retailer Dunelm tumbled as it posted an 8% drop in underlying interim pre-tax profit, said its profit margin declined by 1.8 percentage points to 48.6% and announced the departure of its chief financial officer.
Going the other way, Fidessa flew 23% higher after confirming that it is in "advanced discussions" about being taken over by Swiss banking software group Temenos for £1.4bn in cash.
Hikma Pharmaceuticals surged more than 5% higher after appointing Siggi Olafsson as its new chief executive officer. He brings experience from generic drugs giants Teva and Actavis.
On the blue chip list, Evraz was the standout gainer after signing a new five-year contract the previous day to supply rail products to Russian Railways.
Industrial turnaround specialist Melrose Industries, which is in the throes of a hostile bid for GKN, gained as it reported a narrower pre-tax loss for 2017.
William Hill shrugged off the Gambling Commission's £6.2m fine for breaching anti-money-laundering and social responsibility regulations, while Sports Direct rose as it announced plans to buy back up to £100m worth of its shares as it looks to reduce the share capital of the company.
New contracts boosted Bodycote and Wood Group. The former was a long-term deal with France's Afran to provide manufacturing services, while the latter won a strategic five-year engineering services contract at an Australian gas export project.
On the broker note front, Reckitt Benckiser was cut to 'neutral' at Credit Suisse after its results the day before, Travis Perkins was downgraded to 'hold' at Berenberg and Shire cut to 'neutral' by JPMorgan.
Grafton and ZPG were upgraded to 'buy' and 'overweight' by Berenberg and Morgan Stanley, respectively.
Market Movers
FTSE 100 (UKX) 7,247.69 0.00%
FTSE 250 (MCX) 19,802.85 0.76%
techMARK (TASX) 3,339.30 1.10%
FTSE 100 - Risers
Evraz (EVR) 434.00p 5.34%
Smith (DS) (SMDS) 488.20p 2.74%
Standard Life Aberdeen (SLA) 382.80p 2.65%
Ashtead Group (AHT) 2,065.00p 2.33%
Schroders (SDR) 3,486.00p 2.23%
Hargreaves Lansdown (HL.) 1,707.93p 2.00%
Mondi (MNDI) 1,917.00p 1.89%
Persimmon (PSN) 2,470.00p 1.86%
Sage Group (SGE) 703.80p 1.82%
Rentokil Initial (RTO) 292.50p 1.81%
FTSE 100 - Fallers
BHP Billiton (BLT) 1,490.40p -4.58%
HSBC Holdings (HSBA) 736.40p -3.17%
InterContinental Hotels Group (IHG) 4,570.00p -2.70%
WPP (WPP) 1,400.00p -2.47%
Reckitt Benckiser Group (RB.) 5,942.00p -2.19%
Rio Tinto (RIO) 3,990.50p -1.59%
Fresnillo (FRES) 1,340.50p -1.51%
Shire Plc (SHP) 3,080.00p -0.98%
Severn Trent (SVT) 1,705.00p -0.55%
Antofagasta (ANTO) 893.60p -0.47%
FTSE 250 - Risers
Fidessa Group (FDSA) 3,593.80p 23.29%
Grafton Group Units (GFTU) 804.00p 5.51%
Hikma Pharmaceuticals (HIK) 986.40p 4.89%
Spire Healthcare Group (SPI) 230.40p 4.73%
Sports Direct International (SPD) 373.70p 4.50%
Ocado Group (OCDO) 509.60p 4.43%
Euromoney Institutional Investor (ERM) 1,230.00p 3.89%
Inmarsat (ISAT) 477.80p 3.44%
Fenner (FENR) 468.20p 3.17%
Thomas Cook Group (TCG) 125.20p 2.88%
FTSE 250 - Fallers
Dunelm Group (DNLM) 576.00p -10.90%
McCarthy & Stone (MCS) 134.50p -4.54%
Hochschild Mining (HOC) 220.20p -3.67%
Capita (CPI) 180.95p -2.53%
Vectura Group (VEC) 77.80p -2.32%
Fisher (James) & Sons (FSJ) 1,458.00p -2.02%
Lancashire Holdings Limited (LRE) 561.00p -1.84%
Polymetal International (POLY) 781.40p -1.66%
Kaz Minerals (KAZ) 815.40p -1.57%
TalkTalk Telecom Group (TALK) 100.70p -1.56%