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London close: Stocks edge lower amid US-China trade spat, political uncertainty in Europe
London stocks fell into the red on Monday as the threat of a US-China trade war and political developments in Germany kept investors on edge.
By the end of play, the FTSE 100 was down 0.03% or 2.58 points at 7,631.33.
Meanwhile, the pound had erased some of its earlier losses but was still down 0.28% against the dollar at 1.32408 and 0.29% lower versus the euro at 1.1412, ahead of a vote in the Lords on whether Parliament should be given a say in case of a no-deal Brexit.
Rebecca O'Keeffe, head of investment at Interactive Investor, said: "The negotiating style of President Trump had allowed investors to assume that his threats were hyperbole and part of his unique diplomatic style, and that he would step away from the brink rather than risk undermining the positive impact his previous policies have had on the stock market.
"However, the US decision to press forward and take on China makes the risks far more pronounced and the real danger is that the Chinese retaliation may start a chain reaction that is difficult to stop."
On Friday, Trump announced 25% tariffs on up to $50bn worth of Chinese imports. China then retaliated by announcing 25% tariffs on $34bn worth of imports from the US.
According to Oxford Economics, a second $100bn round of tit-for-tat tariffs, in combination with the first one, could subtract between 0.3-0.4% from the rate of growth of each of those two economies in 2018 and 2019.
Events in Germany were also in focus, with Chancellor Angela Merkel under pressure from her coalition partners over her refugee and immigration policy.
Germany's DAX was the standout loser in Europe, down 1.36% to 12,834.11.
Merkel "faces the worst crisis of her almost 13 years in office", said economists at Berenberg. "If the Bavarian CSU does not agree to any compromise on migration policy, her current government may fall apart shortly," they warned, though they consider this unlikely. More probable is that a compromise will be agreed that allows Merkel to save face - and save the current coalition government.
UK house prices edged higher in June, but prices in London fell as the busier spring selling season came to an end, according to a survey released by Rightmove earlier.
House prices were up 0.4% on the month in June to an average £309,439 down from a 0.8% jump in May, but with asking prices of newly-marketed property setting a new record for the third consecutive month.
On the year, prices were up 1.7% compared to a 1.1% increase in May. In London, however, prices were down 0.9% on the month to £631,737, and 1% lower on the year - marking the tenth consecutive month that the annual rate was in negative territory. Rightmove said London had 16.4% more available inventory than this time last year, fuelling a buyers' market in some areas.
Miles Shipside, Rightmove director, said: "With the normally more active spring buyer market over and with some potential buyers likely to be distracted by summer holidays and World Cup-itis, the goal posts have just moved. Sellers in locations that have seen larger percentage increases in the number of available properties will have to price lower than properties they are competing against, as there are few better tactics than a bargain price to tempt buyers."
In corporate news, Virgin Money reversed earlier gains after accepting a £1.7bn takeover offer from CYBG, the owner of Clydesdale Bank and Yorkshire Bank. CYBG will pay 1.2125 of its own new shares for each Virgin Money share, which based on a closing price at the end of last week of 306p values Virgin Money shares at 371p apiece.
DS Smith was under the cosh even as the paper and packaging company posted a 21% jump in full-year adjusted pre-tax profit on Monday amid growth in all regions.
Rentokil slipped as the Competition and Markets Authority said that its proposed merger with Cannon Hygiene could raise competition concerns and that the deal will be referred for a phase 2 investigation if both companies don't propose remedies by 25 June.
GlaxoSmithKline was a touch weaker following a report in the Sunday Telegraph that Coca-Cola is considering a £3bn bid for its Horlicks business in the UK, which it put up for sale last year.
On the upside, Indivior advanced after it won a restraining order meaning that rival drugmaker Dr Reddy's has to temporarily stop activities related to the development and marketing of a generic alternative to its Suboxone opioid disorder medication.
RSA Insurance and Aviva both rose following a report in the Sunday Times suggesting that German insurer Allianz might be interested in acquiring them.
In broker note action, Associated British Foods edged up after an upgrade to 'outperform' by RBC Capital Markets, while Cobham rallied after Morgan Stanley upgraded the stock to 'overweight' saying it sees an improved risk/reward following a challenging period. "
Rolls-Royce was under the cosh despite an upgrade to 'neutral' from 'underperform' by Credit Suisse while Ocado fell following a downgrade to 'underperform' at Bank of America-Merrill Lynch.
Market Movers
FTSE 100 (UKX) 7,631.33 -0.03%
FTSE 250 (MCX) 20,999.60 -0.03%
techMARK (TASX) 3,551.39 0.27%
FTSE 100 - Risers
RSA Insurance Group (RSA) 667.80p 2.42%
GVC Holdings (GVC) 1,028.00p 2.29%
Micro Focus International (MCRO) 1,369.50p 1.97%
Evraz (EVR) 538.20p 1.62%
Royal Dutch Shell 'A' (RDSA) 2,559.00p 1.49%
Royal Dutch Shell 'B' (RDSB) 2,659.50p 1.29%
Aviva (AV.) 509.00p 1.23%
BP (BP.) 571.80p 1.20%
Berkeley Group Holdings (The) (BKG) 4,215.00p 1.03%
United Utilities Group (UU.) 770.40p 1.00%
FTSE 100 - Fallers
Ocado Group (OCDO) 960.60p -7.79%
Smith (DS) (SMDS) 549.60p -2.52%
Rolls-Royce Holdings (RR.) 927.40p -2.38%
3i Group (III) 953.40p -1.89%
Pearson (PSON) 868.80p -1.74%
Marks & Spencer Group (MKS) 298.40p -1.68%
British American Tobacco (BATS) 3,635.00p -1.60%
Diageo (DGE) 2,743.50p -1.51%
Mondi (MNDI) 2,044.00p -1.35%
Imperial Brands (IMB) 2,595.50p -1.16%
FTSE 250 - Risers
Contour Global (GLO) 214.00p 4.85%
Cobham (COB) 130.05p 4.58%
Aveva Group (AVV) 2,776.00p 3.12%
On The Beach Group (OTB) 516.00p 2.99%
Softcat (SCT) 765.00p 2.82%
Telecom Plus (TEP) 1,064.00p 2.70%
William Hill (WMH) 312.60p 2.59%
888 Holdings (888) 284.20p 2.53%
Homeserve (HSV) 917.00p 2.52%
Wetherspoon (J.D.) (JDW) 1,254.00p 2.45%
FTSE 250 - Fallers
TalkTalk Telecom Group (TALK) 111.20p -6.00%
TI Fluid Systems (TIFS) 274.00p -4.86%
CLS Holdings (CLI) 228.00p -4.20%
IntegraFin Holding (IHP) 360.00p -4.00%
Workspace Group (WKP) 1,115.00p -3.13%
Just Group (JUST) 139.70p -2.31%
Elementis (ELM) 289.40p -2.23%
G4S (GFS) 269.70p -2.21%
Virgin Money Holdings (UK) (VM.) 347.30p -2.17%
Metro Bank (MTRO) 3,278.00p -2.15%