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London close: Miners, Oil & Gas pace losses, even as pound retreats
Traders booked some profits on Wednesday, especially among shares of miners and Oil & Gas names, as downbeat remarks from the US President on the prospects for a trade deal with Beijing sent the dollar higher and commodity prices lower.
The FTSE 100 retreated 1.13% to 7,788.44, even though the pound was off by 0.62% versus the US dollar to 1.33519. Against the euro on the other hand, Sterling was 0.01% higher at 1.1404.
"Geo-political uncertainties were the market drivers today, as 'risk-off' saw major equities retreat further and the USD gained ground as did Yen. Financial turmoil in Turkey and threats to the US/North Korea summit meeting were in the forefront, over and above improved China/US trade relations which buoyed the markets on Monday," said analysts at Sucden Financial.
Worries about relations between the US and China resurfaced after President Trump said on Tuesday evening that he was not happy with the progress being made on trade talks.
Trump also said that there is a "very substantial chance" a historic summit with North Korea's Kim Jong-Un next month may not happen.
The US dollar benefited from the heightened risk aversion that resulted, triggering a fall a 0.56% fall in front month Brent oil futures to $79.13 a barrel.
In parallel, by the end of trading, three-month LME copper futures had slid from $6,957 per metric tonne at the open to finish at $6,867 a tonne.
To take note of as well, dollar gains added to the pain for investors in some emerging markets, especially Turkey.
Also weighing on the pound was data from the Office for National Statistics showing that inflation fell unexpectedly in April, casting further doubt on when the Bank of England will next decide to increase interest rates.
Annual consumer price inflation in Britain eased to 2.4% from 2.5%, official figures showed. The April figure was the weakest since March 2017 and lower than economists' average forecast for inflation to hold steady at 2.5%.
Lower-than-forecast inflation gives the Bank of England further food for thought after its monetary policy committee held off on increasing interest rates in May.
However, Sam Tombs at Pantheon Macroeconomics said he thinks inflation will hold steady in May before jumping to 2.7% in June as consumers endure rises in motor fuel, electricity and natural gas prices, while the MPC's inflation forecasts for 2.5% in June are partly based on forecast only including an $71 oil price, $8 below its current level.
"Provided GDP growth recovers in Q2, June's inflation data likely will be strong enough to persuade a majority of MPC members to vote to raise rates in August, rather than wait until later in the year," Tombs said.
On the other hand, Fabrice Montagne at Barclays Research mused: "Subdued core measures, in particular, highlight the absence of underlying excess momentum in prices and we don't see inflationary risks in stronger wages due to the absorption capacity of higher saving rates and productivity catch up."
In corporate news, reports that Barclays is mulling a possible merger with peers, sent shares in Standard Chartered higher. The Financial Times reported Barclays had been moved to explore deals in response to pressure from activist investor Edward Bramson.
Marks & Spencer was the standout gainer as its proposed revamp of the business trumped a better-than-expected 5.4% fall in annual profits as margins at the retailer's food business were squeezed by the rising cost of ingredients. After including a huge £514m of exceptional costs, mostly related to a £321m provision for the cost of the accelerated store closure programme announced earlier in the week, reported pre-tax profits slumped by 62% to £66m.
Water and sewage group Severn Trent advanced as it increased its dividend 6% after receiving an £80m incentive payment for outperforming on customer 'outcomes', also saying it would invest £100m of savings gained from efficiencies back in the business.
Rio Tinto fell back despite confirming it is in discussions to sell its entire interest in the Grasberg copper mine in Indonesia to Inalum, following reports that it could go for $3.5bn.
Drinks maker Britvic fizzed higher as it posted a jump in interim revenue and earnings and expressed confidence over the rest of the year, although pre-tax profit was dented by £21.6m of costs from its planned business capability programme.
PrimeLocation owner ZPG dipped despite posting a 41% increase in first-half earnings, while Babcock rallied as its full-year earnings beat expectations and Softcat gained as it said full-year results will be ahead of expectations.
On the downside, BBA Aviation was in the red after agreeing to buy fuel and fuel-related services supplier EPIC Fuels for a cash consideration of $88.1m and Bovis Homes fell despite saying that market fundamentals remain strong and total sales for the year are in line with expectations, with pricing strong.
Cathedral City owner Dairy Crest tumbled as it announced plans to raise £69.9m in a 7.7% discounted share placing to fund an expansion of its cheese production facility.
Great Portland Estates was on the back foot even after saying it swung back into an annual profit, while wealth manager St James's Place ticked down as it announced that chairwoman Sarah Bates had decided to retire as chair and as a director of the company. She will be succeeded by Iain Cornish.
In broker note action, Victrex was rated a new 'hold' at HSBC, and Elementis a new 'buy' while IAG was cut to 'reduce' by the same outfit.
Halfords was cut to 'hold' at N+1 Singer. Computacenter was initiated at 'buy' by Stifel and Grainger was cut to 'hold'.
Market Movers
FTSE 100 (UKX) 7,788.44 -1.13%
FTSE 250 (MCX) 21,004.90 -0.88%
techMARK (TASX) 3,534.50 -0.42%
FTSE 100 - Risers
Marks & Spencer Group (MKS) 306.90p 5.17%
Imperial Brands (IMB) 2,817.00p 1.20%
Reckitt Benckiser Group (RB.) 5,982.00p 1.03%
NMC Health (NMC) 3,774.00p 1.02%
SSE (SSE) 1,440.50p 0.91%
Severn Trent (SVT) 2,078.00p 0.87%
United Utilities Group (UU.) 803.00p 0.73%
Bunzl (BNZL) 2,318.00p 0.61%
Standard Chartered (STAN) 770.30p 0.44%
Scottish Mortgage Inv Trust (SMT) 509.00p 0.20%
FTSE 100 - Fallers
Anglo American (AAL) 1,829.80p -5.01%
WPP (WPP) 1,302.50p -4.23%
Royal Dutch Shell 'A' (RDSA) 2,648.00p -3.34%
Rio Tinto (RIO) 4,278.50p -3.17%
Royal Dutch Shell 'B' (RDSB) 2,738.50p -3.11%
Antofagasta (ANTO) 1,067.50p -2.78%
easyJet (EZJ) 1,736.00p -2.50%
International Consolidated Airlines Group SA (CDI) (IAG) 686.00p -2.36%
Evraz (EVR) 480.00p -2.22%
Standard Life Aberdeen (SLA) 362.70p -2.21%
FTSE 250 - Risers
Softcat (SCT) 711.00p 7.56%
Britvic (BVIC) 815.50p 7.51%
Greencore Group (GNC) 175.00p 6.32%
Card Factory (CARD) 228.80p 4.28%
Homeserve (HSV) 884.00p 3.88%
Babcock International Group (BAB) 784.00p 2.56%
Thomas Cook Group (TCG) 122.70p 2.51%
Capital & Counties Properties (CAPC) 295.70p 2.50%
Capita (CPI) 132.90p 1.76%
Vietnam Enterprise Investments (DI) (VEIL) 452.00p 1.57%
FTSE 250 - Fallers
Vedanta Resources (VED) 746.80p -11.52%
Dairy Crest Group (DCG) 495.00p -7.74%
Cairn Energy (CNE) 248.00p -5.99%
Tullow Oil (TLW) 258.90p -5.20%
On The Beach Group (OTB) 470.00p -5.05%
Kaz Minerals (KAZ) 1,017.00p -4.28%
Ocado Group (OCDO) 863.20p -4.26%
Shaftesbury (SHB) 948.00p -4.24%
Purecircle Limited (DI) (PURE) 333.50p -4.17%
Petrofac Ltd. (PFC) 574.26p -4.16%