London close: Stocks dip amid political uncertainty, US-China trade tensions

Fri 17 May 2019

LONDON (SHARECAST) - (Sharecast News) - London stocks finished the session little changed on Friday, even as sterling fell after Brexit talks between the government and the Labour party collapsed and a Chinese official indicated that no further trade talks with the US in the near-term.
The FTSE 100 was off 0.1% at 7,348.62. Meanwhile, the pound was down 0.52% against the US dollar at 1.27312 - falling below $1.28 for the first time since February - and 0.44% lower versus the euro at 1.1402 as Labour leader Jeremy Corbyn said cross-party talks "have gone as far as they can". He said the discussions, which have gone on for six weeks, can no longer continue due to the government's "increasing weakness and instability".

In parallel, the second-tier index dipped by 0.16% to 19,498.61.

Corbyn reiterated the fact that his party will continue to oppose the government's deal, as it does not safeguards jobs, living standards or the manufacturing industry.

In a research note sent to clients, economists at Bank of America-Merrill Lynch said they were now assuming that Brexit would remain unresolved by end-2020 and that the brinkmanship between Beijing and Washington would last at least until the end of June.

Because of the former, they no longer foresaw a so called "Brexit deal dividend" - or acceleration in growth into mid-2020 - although an "eventual" resolution of the US-China talks would allow a degree of recovery in economic growth during the following year.

UK GDP growth in 2020 was now seen half a percentage point lower, at 1.1%, but BofA-ML bumped-up its projection for 2019 from 1.1% to 1.4% on the back of the stronger-than-expected pace of expansion seen over the first three months of the year.

In the background meanwhile, a spokesman for the Chinese commerce ministry, Gao Feng, said American officials had to address Beijing's three major concerns in order for talks to resyme and accused the US of ratcheting up the pressure on the country, saying that it had "seriously hurt" talks.

Gao was referring to the red lines set out by China's negotiators in recent days, including removing all import tariffs, that targets for purchases of US goods should be in-line with real demand in China and that the text of any deal must be "balanced" in order to ensure the "dignity" of both countries.

The spokesman further indicated that he had no information regarding visits by any US officials for talks.

In equity markets, Just Eat was the biggest loser on the FTSE 100 after it emerged that Amazon will make a big investment in rival Deliveroo. No exact figures were given, but Deliveroo said Amazon will be the largest investor in its $575m funding round.

Russ Mould, investment director at AJ Bell, said: "Given its financial firepower it is little wonder that Amazon effectively parking its tanks on Just Eat's lawn is spooking investors. The marketplace was already getting increasingly competitive with Uber Eats another firm chasing consumers' appetite for takeaway food.

"It is worth remembering that Just Eat remains the market leader in the UK, however this development ramps up the pressure on management as they reshape the business to increasingly offer delivery services alongside an online takeaway platform."

Laith Khalaf, senior analyst at Hargreaves Lansdown, said the slump in the share price means Just Eat could get knocked out of the FTSE 100 in the next reshuffle.

Outside the FTSE 350, shares in Thomas Cook crashed again a day after it warned on profits, as Citi downgraded it to 'sell' from 'neutral' and argued that the stock is "basically worthless", slashing the price target to zero from 28p.

On the upside, EasyJet flew higher as it left its 2019 profit expectations unchanged but warned of tougher trading conditions as it said losses before tax widened to 272m in the first half from 68m the year before. British Airways and Iberia parent International Consolidated Airlines Group was also a high riser.

IG market analyst Joshua Mahony said: "With TUI and Thomas Cook posting substantial losses of late, we have seen expectations of a profit warning drive EasyJet lower before today's earnings.

"Ultimately, with the company seeing a 13% rise in passengers and profits expected to remain in line with prior expectations, this is a case of a company outperforming a very low bar set by the market. With the airline taking steps to avoid the impact of future strikes and airports better prepared for other drone incident, traders are growing confident that these recent losses are a one-off rather than a new norm."

Metro Bank shares bounced sharply as the challenger bank said it raised 375m in less than three hours after launching a discounted 500p a share placing late on Thursday. This was 25m more than it had set out to raise.

Market Movers

FTSE 100 (UKX) 7,348.62 -0.07%
FTSE 250 (MCX) 19,498.61 -0.16%
techMARK (TASX) 3,544.67 0.01%

FTSE 100 - Risers

easyJet (EZJ) 1,025.00p 5.34%
TUI AG Reg Shs (DI) (TUI) 828.20p 3.65%
Bunzl (BNZL) 2,119.00p 2.86%
Burberry Group (BRBY) 1,852.50p 2.46%
Micro Focus International (MCRO) 1,908.60p 1.79%
Imperial Brands (IMB) 2,162.00p 1.50%
Compass Group (CPG) 1,800.00p 1.47%
International Consolidated Airlines Group SA (CDI) (IAG) 509.00p 1.39%
Rio Tinto (RIO) 4,673.00p 1.39%
Sage Group (SGE) 746.80p 1.19%

FTSE 100 - Fallers

Just Eat (JE.) 622.00p -8.23%
Hikma Pharmaceuticals (HIK) 1,739.00p -2.52%
NMC Health (NMC) 2,493.00p -2.35%
Ferguson (FERG) 5,420.00p -2.34%
Standard Chartered (STAN) 677.20p -2.25%
Evraz (EVR) 569.00p -2.17%
SSE (SSE) 1,041.00p -2.07%
Smurfit Kappa Group (SKG) 2,177.00p -1.94%
Lloyds Banking Group (LLOY) 60.34p -1.90%
Melrose Industries (MRO) 177.60p -1.88%

FTSE 250 - Risers

Metro Bank (MTRO) 669.00p 26.19%
Provident Financial (PFG) 482.50p 4.30%
Clarkson (CKN) 2,290.00p 4.09%
GVC Holdings (GVC) 626.60p 3.67%
888 Holdings (888) 133.80p 3.48%
Telecom Plus (TEP) 1,490.00p 2.76%
Dechra Pharmaceuticals (DPH) 2,760.00p 2.53%
Woodford Patient Capital Trust (WPCT) 81.70p 1.97%
Jupiter European Opportunities Trust (JEO) 816.00p 1.87%
Avast (AVST) 307.40p 1.79%

FTSE 250 - Fallers

Indivior (INDV) 48.56p -8.48%
Sirius Minerals (SXX) 15.75p -5.75%
Saga (SAGA) 51.70p -3.54%
Kier Group (KIE) 322.60p -3.47%
Domino's Pizza Group (DOM) 246.10p -2.73%
Investec (INVP) 493.40p -2.61%
Quilter (QLT) 142.16p -2.38%
Hammerson (HMSO) 287.70p -2.24%
Fidelity China Special Situations (FCSS) 221.50p -1.99%
Funding Circle Holdings (FCH) 255.00p -1.92%
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