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(Alliance News) - Stocks in London ended lower on Thursday as tensions between the US and China escalated with the chances of a preliminary trade deal being reached by the end of the year fading.
US lawmakers took the last step to approve legislation supporting protesters in Hong Kong in an almost unanimous vote on Wednesday, before sending it on to President Donald Trump for a signature.
China on Thursday accused the US of seeking to "destroy" Hong Kong and threatened retaliation after Congress passed new legislation supporting the pro-democracy movement that has thrown the city into nearly six months of turmoil.
Foreign Minister Wang Yi said the passage of the Hong Kong Human Rights & Democracy Act "indulges violent criminals", which China blames for the worsening unrest, and aims to "muddle or even destroy Hong Kong".
In addition, a foreign ministry spokesman vowed that China would "take effective measures to resolutely fight back", giving no details.
The FTSE 100 index closed down 23.94 points, or 0.3%, at 7,238.55. The FTSE 250 ended down 105.39 points, or 0.5%, at 20,369.86, but the AIM All-Share closed up 2.89 points, or 0.3% at 902.21.
The Cboe UK 100 index finished down 0.4% at 12,258.36. The Cboe UK 250 closed down 0.8% at 18,270.10 and the Cboe UK Small Companies ended up 0.4% at 11,275.01.
In Paris the CAC 40 index ended down 0.2%, while the DAX 30 in Frankfurt ended down 0.2%.
"Just like every session before this, today has seen US-China relations take centre stage, with Donald Trump expected to approve the controversial pro-Hong Kong bill that has now passed through both the Senate and House of Representatives. With the bill threatening to impose sanctions in the events of human rights violations, approval of it would not only hurt US-China relations, but also raise the possibility of another economic downturn," said IG Group's Josh Mahony.
On the London Stock Exchange, Centrica ended the best blue chip performer, up 9.1% after after the British Gas owner backed annual guidance after what it said has been a "solid" second-half performance.
The utility firm delivered growth in customer accounts, higher margins, and returns in business energy supply in North America, it said, as well as strong trading in Europe. This has helped offset the impact of further outages at the non-operated Dungeness B and Hunterston B nuclear power stations, in Kent and North Ayrshire respectively. Nuclear operations were put up for sale earlier this year.
Centrica backed 2019 guidance of adjusted operating cash flow at the lower end of GBP1.8 billion to GBP2.0 billion, and net debt within GBP3.0 billion to GBP3.5 billion. The firm has cut capital investment guidance to GBP800 million from GBP900 million, and increased efficiency savings for the year to GBP300 million from GBP250 million.
British American Tobacco closed up 3.9% after the US Department of Health & Human Services dropped a proposal unveiled two years ago to cut the nicotine in cigarettes to nonaddictive levels, according to a regulatory document published on Wednesday.
At the other end of the large-cap index. Johnson Matthey closed down 7.1% after the specialty chemical firm said interim profit was hit by problems in its Clean Air division.
Pretax profit fell 8% to GBP225 million for the half-year to September, and the underlying figure also declined by 8% to GBP231 million. The company said profit was hit by around GBP15 million of one-off costs in the Clean Air division due to higher freight costs and manufacturing inefficiencies. This, Johnson Matthey continued, stemmed from the phasing of the completion of a new plant in Poland.
Looking ahead, Johnson Matthey expects full-year performance to meet the market's expectations.
In the FTSE 250, Direct Line Insurance closed up 6.4% after the insurer late Wednesday said its third-quarter performance was encouraging.
Direct Line said its total gross written premiums for the three months to September 30 rose 0.4% to GBP858.0 million from GBP854.5 million the year before. This included a return to growth for motor to GBP457.8 million, up 0.3% from GBP456.4 million.
In terms of financial targets, Direct Line is aiming to improve its operating expense ratio to 20% by the end of 2023 so it is more sustainably competitive. In 2018, Direct Line's operating expenses came to GBP722 million, or GBP644 million before depreciation and amortisation. The company hopes to cut this GBP644 figure by over GBP50 million by 2021 to under GBP590 million.
Further, Direct Line gave details on plans for capital returns saying: "At the group's current valuation, where the regular dividend yield is materially higher than market comparators, the board's preference is to return any surplus capital, after ordinary dividends, by way of a buyback programme."
Languishing at the bottom of the FTSE 250, Royal Mail ended the worst performer, down 14%. The postal operator reported a significant rise in interim profit, but warned its transformation plan is off track.
Royal Mail's pretax profit for the six months to September 29 multiplied to GBP173 million from GBP33 million, though the adjusted figure was down 20% to GBP146 million. Revenue climbed by 5.2% to GBP5.17 billion.
However, Royal Mail warned the outlook for the letters business in the UK remains challenging, due to lower-than-expected UK economic growth and business uncertainty. For its current financial year, Royal Mail sees a 7% to 9% fall in addressed letter volumes, excluding the upcoming UK general election, which brings a surge of political mailings. Next year, volumes could fall between 6% to 8%.
Royal Mail saw GBP328 million slashed off its total market value, which had stood at GBP2.31 billion on Wednesday.
The pound was quoted at USD1.2915 at the London equities close, marginally higher against USD1.2909 at the close Wednesday, with exactly three weeks to go until the UK general election.
In the latest developments, UK Prime Minister Boris Johnson insisted his pledge for a million more homes in the next five years is "deliverable" as he outlined plans designed to "empower" renters and help first-time buyers.
The PM announced a series of manifesto policies on a visit to a new housing development in Wixams, Bedford, where he tried his hand at bricklaying at one of the properties.
Johnson vowed to change the law to end "no fault evictions" which see tenants forced out of rental properties without a good reason. He also said the Tories would introduce Lifetime Rental Deposits so down payments can be transferred from one property to the next, before the deposit from the first property is repaid.
Meanwhile in Birmingham, Labour leader Jeremy Corbyn unveiled his party's general election manifesto in what he called the "most radical and ambitious plan to transform our country in decades".
Labour's manifesto pledged to invest in public services, take action to tackle climate change and return key utilities to public ownership.
This would see day-to-day government spending rise by GBP83 billion by 2024 - paid for by tax increases for business and the better off - with investment of GBP400 billion over the course of the next decade.
In a surprise move, the party announced plans for a windfall tax on the oil and gas companies, to provide an GBP11 billion support package for workers in the industry as the country shifted to renewable energy sources.
Corbyn said this was a "manifesto of hope" that would bring to an end a system "rigged" in favour of "the billionaires and the super rich".
In addition, the manifesto reaffirmed Labour's commitment to renegotiate a new Brexit deal with Brussels and then put it to the public in a referendum.
The euro was unchanged from late Wednesday at USD1.1066 at the European equities close.
European Central Bank policymakers strove in an October meeting to restore "unity" and rally behind fiercely fought-over measures decided in September, an account published Thursday showed.
"A strong call was made for unity of the governing council" made up of the ECB's six-strong board and 19 national central bank governors from eurozone nations, the account recorded.
Former president Mario Draghi said following the October meeting that his opponents had called for unity and said "bygones are bygones" after the previous month's battles.
The ECB endured a bruising backlash after the bank decided in September to cut interest rates further into negative territory and to restart its bond-buying programme in response to slowing growth and inflation. The heads of the German, Dutch, French and Austrian central banks all publicly chastised the move.
Draghi's successor Christine Lagarde has looked to renew bonds of trust among governing council members. In a photo tweeted from her account on November 14, the 25 relaxed and smiling central bankers were seated around a circular table in a hotel outside Frankfurt.
Following the "retreat" away from the ECB's glass-and-steel tower, former French finance minister Lagarde is scheduled to speak at a Frankfurt banking conference on Friday, with investors looking for any hints about future policy.
"Today's minutes highlighted a need to unify the committee, following a polarising decision to embark on a raft of monetary stimulus despite the lack of a consensus. With Lagarde expected to lean on fiscal expansion in her role as governor, there is likely to be a greater sense of unity over ensuring nations provide sufficiently expansive measures to compliment the measure taken by the ECB," said Mahony.
Against the yen, the dollar was trading at JPY108.55, lower than JPY108.63 late Wednesday.
Stocks in New York were lower at the London equities close as investors remained cautious on US-China trade negotiations.
The DJIA, the S&P 500 index and the Nasdaq Composite were all down 0.3%.
US President Donald Trump said late Wednesday that China was not "stepping up" sufficiently to secure a preliminary trade deal struck last month.
"There is planned a new round of tariff increases in mid-December, unless the countries reach an agreement. A more rational approach for the markets now seems to be that the deal will not be concluded, despite the optimistic statements from both sides. As we have noticed many times before, the markets at some point are shifting their attention from promises to real acts, especially when market indices look are overbought," said analysts at FXPro.
In an additional blow for sentiment, the Organisation for Economic Cooperation and Development on Thursday said the global economy was headed for its weakest growth since the financial crisis, citing the trade war as a significant factor.
Brent oil was quoted at USD63.60 a barrel at the London equities close, up from USD62.30 at the close Wednesday.
Gold was quoted at USD1,468.59 an ounce at the London equities close, flat against USD1,468.57 late Wednesday.
The economic events calendar on Friday has manufacturing and services PMI readings from Germany, the eurozone, the UK and US at 0830 GMT, 0900 GMT, 0930 GMT and 1445 GMT respectively.
The UK corporate calendar on Friday has interim results from car dealer Caffyns and currency manager Record. There are also trading statements from industrial thread maker Coats Group and gambling software company Playtech.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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