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London midday: Stocks slide as pound pops on Brexit transition deal
London stocks fell further into the red by midday on Monday as the pound rallied on the back of a draft Brexit deal, with traders also looking ahead to a week ahead that includes monetary policy meetings for the US Federal Reserve and the Bank of England.
The FTSE 100 was down 1.3% to 7,070.45, as pound climbed 0.9% versus the dollar to 1.4073 and 0.7% against the euro to 1.1428 after Britain and the European Union agreed a 21-month Brexit transition deal, though the Irish border was among several issues not yet resolved.
The two sides have agreed a draft legal text for a transition deal once Britain splits from the bloc in March 2019, with Britain continuing to operate under all single market rules and judgments from the European Court of Justice until the end of 2020, while having no further say in future EU decisions. Brexit Secretary David Davis and chief EU negotiator Michel Barnier announced the agreement in Brussels on Monday morning. The UK will be able to sign trade deals during this time and EU nationals arriving in UK during the transition will get same rights as before.
As the pound rallied, the top-flight index extended losses as around 70% of its constituents are highly sensitive to currency swings because they deriving most of their earnings from overseas.
A meeting of G-20 finance minister kicks off later in the day in Argentina, with trade tariffs likely to be the main topic of conversation after the European Union released details of counter-measures to US President Trump's steel and aluminium tariffs.
Meanwhile the Fed rate announcement is due on Wednesday. A rate announcement is also due from the Bank of England on Thursday, along with retail sales data and the latest BoE minutes.
Investors were digesting the latest data from Rightmove, which showed average asking prices paid by first- and second-time buyers in Britain hit records levels this month, although prices in the capital fell.
Prices paid by first- and second-time buyers rose to £189,840 and £272,031, respectively, while overall, house prices were up 1.5% on the month in March and 2.1% on the year.
It was a different picture in London, however, where prices were up 0.6% on the month but down 0.6% on the year, with the annual rate in negative territory for the seventh consecutive month.
On the corporate front, bookmakers were in focus as the Gambling Commission recommended that the maximum stake for fixed odds betting terminals be cut to £30 or less. It said the maximum stake on slot games such a fruit machines should be £2. As it stands, people can bet up to £100 every 20 seconds on electronic casino games.
William Hill, Ladbrokes Coral and Paddy Power Betfair all rallied on the news, as many had feared a bigger cut to as little as £2.
Neil Wilson, senior market analyst at ETX Capital, said: "This should be a relief for the sector as the worst-case scenario looks to have been avoided. Ministers will now have to justify a cut below £30 on grounds of significant risk of harm.
"With the non-slots versions of the B2 machines (roulette etc) far more popular and producing the bulk of revenues for bookies from these machines, this is undoubtedly a positive outcome for bookmakers overall. Although the market had decided a £2 flat cap was looking less likely, the fact the Gambling Commission has left ministers with an easy out for a £30 is perhaps even better than hoped for."
Shares in Micro Focus nosedived 50% as the company cut its profits guidance less than six months after completing the huge acquisition of HP's software arm. Chief executive Chris Hsu also resigned "to spend more time with his family".
On the upside, Hammerson surged as it confirmed that it had recently rejected a £5bn bid from French shopping centre operator Klepierre. British Land and Land Securities also gained ground on the news.
Barclays was on the front foot as it emerged that activist investor Sherborne Investors has acquired 5.2% of the voting rights in the bank.
Elsewhere, the GKN/Melrose saga continued as Dana Inc, which has agreed to merge with GKN's Driveline business, said the new combined business will hold a standard listing on the London Stock Exchange, in addition to being listed on the New York Stock Exchange. It also said the combined group would create a US and UK-led global leader in vehicle drive systems and electric propulsion, that was well-suited to address the long-term demands of global customers, expecting to deliver $235m (£170m) in synergies.
Meanwhile, Melrose said that its final offer of 466p in value today and 60% of future value creation, was "clearly superior" to the "hasty break-up" being pursued by the GKN board. GKN was in the black while Melrose retreated.
In broker note action, AstraZeneca was upgraded to 'buy' at Jefferies, while Rotork was lifted to 'buy' at Peel Hunt. Greene King was upgraded by Morgan Stanley but Close Brothers was cut to 'hold' by Berenberg.
Market Movers
FTSE 100 (UKX) 7,070.45 -1.31%
FTSE 250 (MCX) 19,729.58 -0.38%
techMARK (TASX) 3,246.59 -2.69%
FTSE 100 - Risers
Barclays (BARC) 217.81p 3.97%
British Land Company (BLND) 649.80p 2.82%
Land Securities Group (LAND) 930.90p 2.66%
Berkeley Group Holdings (The) (BKG) 3,776.00p 1.70%
SEGRO (SGRO) 615.80p 1.22%
Royal Mail (RMG) 519.80p 0.74%
GKN (GKN) 429.70p 0.66%
Taylor Wimpey (TW.) 184.65p 0.27%
Sky (SKY) 1,312.50p 0.23%
easyJet (EZJ) 1,661.87p 0.20%
FTSE 100 - Fallers
Micro Focus International (MCRO) 839.80p -55.44%
Anglo American (AAL) 1,712.20p -3.23%
BHP Billiton (BLT) 1,401.40p -2.90%
Mediclinic International (MDC) 585.00p -2.79%
Glencore (GLEN) 375.15p -2.68%
Old Mutual (OML) 242.50p -2.61%
Rio Tinto (RIO) 3,637.50p -2.61%
Rentokil Initial (RTO) 269.90p -2.39%
Centrica (CNA) 135.10p -2.35%
British American Tobacco (BATS) 4,090.00p -2.23%
FTSE 250 - Risers
William Hill (WMH) 334.90p 4.49%
Capital & Counties Properties (CAPC) 274.20p 3.47%
Intu Properties (INTU) 210.10p 2.99%
Fenner (FENR) 479.60p 2.79%
Go-Ahead Group (GOG) 1,670.00p 2.52%
Workspace Group (WKP) 993.00p 2.37%
Ladbrokes Coral Group (LCL) 174.30p 2.26%
Dunelm Group (DNLM) 560.00p 1.91%
Derwent London (DLN) 3,106.00p 1.70%
Greene King (GNK) 484.58p 1.70%
FTSE 250 - Fallers
Capita (CPI) 156.25p -5.50%
Hikma Pharmaceuticals (HIK) 1,066.00p -4.95%
Cineworld Group (CINE) 236.00p -4.61%
Investec (INVP) 574.80p -3.75%
Ferrexpo (FXPO) 301.30p -3.74%
Sophos Group (SOPH) 479.16p -3.67%
Vedanta Resources (VED) 760.80p -3.35%
TBC Bank Group (TBCG) 1,796.00p -3.23%
Contour Global (GLO) 250.00p -3.10%
Kaz Minerals (KAZ) 903.00p -2.97%