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(Alliance News) - Stocks in London were sharply lower at midday on Wednesday on renewed concerns about China-US trade talks after Washington lawmakers passed a bill supporting Hong Kong civil rights.
The vote by the Senate came as investors were already growing nervous about the lack of solid news on negotiations for a mini tariffs pact to help resolve a debilitating and long-running standoff between the economic superpowers.
China was already angered and expressed "strong indignation" last month when the US House of Representatives passed a similar measure.
The Hong Kong Human Rights & Democracy Act, which must be signed off by President Donald Trump, supports "human rights and democracy" in Hong Kong and threatens to potentially revoke its special economic status as US lawmakers grow concerned about an increasingly tough crackdown on the months-long protests.
The bill would require the president to annually review the favourable trade status Washington grants to the city and allows for sanctions against Hong Kong and Chinese officials who commit human rights abuses including "extrajudicial rendition".
In addition, Trump on Tuesday raised the threat of more levies on Chinese goods, warning: "If we don't make a deal with China, I'll just raise the tariffs even higher."
The FTSE 100 was down 99.33 points, or 1.4%, at 7,224.47. The FTSE 250 was down 127.60 points, or 0.6%, at 20,400.88, but the AIM All-Share was up 2.34 points, or 0.3%, at 899.19.
The Cboe UK 100 index was down 1.3% at 12,250.62. The Cboe UK 250 was down 0.8% at 18,312.07, and the Cboe UK Small Companies was up 0.1% at 11,288.71.
In Paris the CAC 40 was down 0.7%, while the DAX 30 in Frankfurt was down 0.9%.
"The early gains of Tuesday's session for European markets are a distant memory, having turned to dust during the afternoon. Today has seen those losses continue, reinforcing the short-term negative view. Markets such as the DAX were always vulnerable to some selling after the impressive bounce over the past six weeks, but for now it is definitely in the 'pause' category rather than the beginning of something much more substantial," said IG Group's Chris Beauchamp.
"Trade wars may soon be back on the agenda, as the US passes a bill backing the protestors, and the diplomatic spat between the UK and China escalates - a Chinese response via tariffs may not be long in coming, threatening to revive the trade conflict between the US and China as a result. This would likely turn the current weakness into equities into something more substantial, echoing the see-saw moves seen earlier in the year," Beauchamp added.
On the London Stock Exchange, Kingfisher was the worst blue chip performer, down 7.0% after the DIY retailer warned its prospects remain gloomy following a "disappointing" third-quarter performance.
The weak performance, Kingfisher said, was due to continued disruption in bringing in new product ranges, lower promotional activity, weakness in France, as well as generally softer market conditions in the firm's core markets. In the UK, B&Q UK & Ireland delivered a 3.5% decline in revenue, with like-for-like down 3.4%. Screwfix increased revenue by 7.9%, and 3.7% like-for-like.
Kingfisher's French businesses, Castorama and Brico Depot, posted a 5.7% and 6.2% revenue decline respectively. Like-for-like, revenue was down 6.0% for Castorama and 6.1% for Brico Depot.
Looking to the full-year, Kingfisher sees softness and range disruption continuing in the UK, while in France, Castorama is set to underperform the market and Brico Depot will suffer from lower promotional activity.
Aviva was down 3.9%. The insurer unveiled its new "simplification" strategy, saying it is going to begin operating with five divisions.
The "simplification" is expected to result in GBP300 million in net savings by 2022, Aviva said, with a GBP1.5 billion reduction of debt. Aviva said the overall strategy will allow it to "excel at fundamentals" and invest in sustainable growth. Over the next three years, Aviva is looking to invest GBP1.3 billion in the company. Additionally, Aviva is to sell its stake in Hong Kong business, called Blue, to co-investor Hillhouse Capital.
Turning to medium term financial targets, Aviva is guiding for a solvency II return on equity by 2022 of 12%. From 2019 to 2022, operating capital generation is expected to be GBP7.5 billion, with cash flows between GBP8.5 billion and GBP9.0 billion. For 2019, the insurer's operating profit is expected to be "broadly" in line with management expectations.
Sage Group was down 3.5% after the accounting software provider reported mixed annual results which saw strong revenue growth, but a decline in profit.
Sage said for the financial year ended September 30, revenue was up 4.9% to GBP1.94 billion from GBP1.82 billion in financial 2018. Organic revenue growth was 5.6% to GBP1.8 billion from GBP1.7 billion, underpinned by software subscription revenue growth.
Pretax profit was GBP425.0 million, down 11% from GBP475.0 million in 2018. Underlying pretax profit was down 9% to GBP361.0 million, compared to GBP398.0 million in 2018.
In the FTSE 250, Mitchells & Butlers was the best performer, up 5.5% after the restaurant and pub operator reported "strong" growth in financial 2019, with an increase in profit driven by a rise in sales.
In the 52 weeks to September 28, Mitchells & Butlers recorded GBP177 million in pretax profit, 36% higher than the GBP130 million reported the year before. Revenue grew 4.2% year on year to GBP2.24 billion from GBP2.15 billion, with total sales up 3.9%.
The pound was quoted at USD1.2900 at midday, lower than USD1.2929 at the London equities close Tuesday, as the dust settled on a heated UK general election debate between UK Prime Minister Boris Johnson and Labour leader Jeremy Corbyn on Tuesday evening.
Johnson clashed with Corbyn over their rival plans for Brexit during the heated debate, with the Labour leader describing the PM's pledge to "get Brexit done" by the end of January as "nonsense", while Johnson suggested his rival was "not fit to lead our country".
The political rivals also contested issues concerning the National Health Service and a further referendum on Scottish independence in the first televised debate of the general election campaign.
Stocks in New York were set for a lower open retreating from record highs touched on Tuesday. The DJIA was called down 0.4%, the S&P 500 index down 0.5% and the Nasdaq Composite down 0.6%.
Ahead in the economic calendar on Wednesday, the US Federal Reserve Open Market Committee minutes will be released at 1900 GMT.
The US Federal Reserve cut interest rates for the third time in 2019 at its last meeting in October.
After the meeting, US Fed Chair Jerome Powell had in his post-rate statement, indicated that the FOMC was ready to pause action on rates until the effects of the last three rate cuts on the US economy were assessed.
"So many Fed officials have spoken since the meeting, the minutes are unlikely to break new ground. However, given that Powell has only talked about downside risks, and NY Fed President Williams did the same yesterday, we suspect that the market idea that the October cut was somehow hawkish because the Fed signaled a pause may be challenged. Yes, the Fed's 'midcourse correction' like two in the 1990s consisted of three cuts. However, the next move is still likely to be a cut, and the bar may not be as high as the 'hawkish cut' framing suggests," said Bannockburn Global Forex Chief Market Strategist Marc Chandler.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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