(Alliance News) - London stocks ended Tuesday's session on a downbeat note amid further fiery words aimed at China from US President Donald Trump, while the pound managed to claw back its losses on news UK Prime Minister Boris Johnson has lost his parliamentary majority.
The FTSE 100 index closed down 13.75 points, or 0.2%, at 7,268.19. Amid the pound's slump on Tuesday's morning, the internationally-exposed index hit an intraday high of 7,301.47.
The FTSE 250 ended down 17.41 points, or 0.1%, at 19,464.14 on Tuesday, and the AIM All-Share closed down 0.07 of a point at 873.53.
The Cboe UK 100 ended down 0.4% at 12,314.97, the Cboe UK 250 closed down 0.2% at 17,300.30, and the Cboe Small Companies ended down 0.6% at 10,843.81.
The pound was quoted at USD1.2082 at the London equities close Tuesday, compared to USD1.2062 at the close on Monday.
"The pound had been in freefall earlier, yet despite the growing uncertainty of what comes next, we have seen GBPUSD reverse higher on the news that Boris Johnson has lost his majority in Parliament via the defection of Phillip Lee to the Lib Dems," said Joshua Mahony, senior market analyst at IG.
Earlier in Tuesday's session, the pound had traded below the USD1.20 mark to levels not seen since 1985, excluding 2016's flash crash.
In a moment of high-drama in the House of Commons, former Conservative MP Lee crossed the floor while Prime Minister Boris Johnson was delivering a statement on the recent G7 summit. It means the government has now lost its working majority in the Commons.
In a statement, Lee said: "This Conservative Government is aggressively pursuing a damaging Brexit in unprincipled ways."
Lib Dem leader Jo Swinson welcomed Lee to the party.
IG's Mahony added: "Phillip Lee's defection highlights the willingness of those rebel MPs to vote against Johnson in today's bill, with his widely anticipated loss likely to lead us into an October general election."
In other pound-sensitive news on Tuesday, the UK construction sector fell further into contraction territory in August as the industry suffered a sharp decline in new work.
The IHS Markit/CIPS UK construction purchasing managers' index reading for August came in at 45.0 in August, down slightly from 45.3 in July. The figure missed the consensus estimate of 45.9, according to FXStreet .
The score was below the 50.0 mark, which separates expansion from contraction, for the fourth consecutive month, Markit added.
"Beyond the pound, the markets weren't very happy this Tuesday. The implementation of the latest round of tariffs on Chinese goods by the US has seemingly acted as a reminder that the situation remains ugly between the two superpowers," said Connor Campbell at Spreadex.
Fanning the flames of the ongoing US-China trade war, President Donald Trump warned Beijing not to drag its feet in trade negotiations in hopes of a better deal if he is voted out of office next year.
Negotiations are due to resume this month after a sharp deterioration in the year-long trade war in August.
"We are doing very well in our negotiations with China," Trump said on Twitter, claiming China's deteriorating economy could not withstand a long wait for a resolution.
"While I am sure they would love to be dealing with a new administration...16 months PLUS is a long time to be hemorrhaging jobs and companies."
"And then, think what happens to China when I win. Deal would get MUCH TOUGHER!"
Stocks in New York were in the red at the London equities close, with the Dow Jones down 1.5%, the S&P 500 index down 0.9%, and the Nasdaq Composite down 1.0%.
The US manufacturing sector expanded modestly in August despite having previously been estimated to shrink, data showed, though output remains subdued.
The final IHS Markit Manufacturing Purchasing Managers' Index for August came in at 50.3, down from 50.4 in July but higher than the 49.9 initially estimated for August. Any reading above 50 indicates growth in a sector, while one below signals contraction.
The rate of production growth was among the slowest seen for over three years in August amid subdued client demand.
In European equities on Tuesday, the CAC 40 in Paris ended down 0.5%, while the DAX 30 in Frankfurt slipped 0.4%.
The euro stood at USD1.0963 at the European equities close Tuesday, against USD1.0965 at the same time on Monday.
Weighing on London's FTSE 100 on Tuesday was DS Smith, ending down 3.5% after the packaging firm reported a solid first quarter in the face of macro-economic volatility.
DS Smith said business has continued to progress well in the first quarter to the end of July, driven by new wins in Europe and the US, as well as ongoing operating cost efficiencies and a focus on generating cash flow. These actions have bolstered DS Smith's confidence in its business, it said, despite ongoing subdued volumes in some markets, particularly areas with significant export-led market exposure, such as Germany.
Just Eat shares shed 2.8%. Eminence Capital, which holds a 4.4% stake in the online takeaway platform, said it intends to vote against the FTSE 100-listed firm's merger with Amsterdam's Takeaway.com.
Ricky Sandler, chief executive officer & chief investment officer of Eminence, said: "It is clear to us that Takeaway.com's offer of a 15% premium to Just Eat's closing price on July 26 is highly opportunistic. We believe that a valuation disparity of this degree is unprecedented in similar transactions over the past decade and represents a gross undervaluation of Just Eat's strong portfolio of marketplace assets."
Takeaway.com shares closed down 5.9% in Amsterdam.
Back in the FTSE 100, Ferguson shares rose 2.1% after the plumbing and heating products firm said it intends demerge its UK operations and will evaluate a new listing structure for its businesses.
Wolseley UK will become an independently-listed company solely serving the UK market and Ferguson will be wholly focused on North America, the company explained.
The FTSE 100-listed company, which has previously mulled a US-listing, said it will consider the "most appropriate listing structure" for its businesses.
Elsewhere, FTSE 250-listed Restaurant Group dipped 12% after sinking to an interim loss.
In the 26 weeks to June 30, the restaurant chain operator recorded a sharp swing to a pretax loss of GBP87.7 million from a GBP12.2 million profit a year before.
Restaurant Group recorded GBP115.7 million in exceptional costs in the first half, compared to just GBP8.4 million a year before. In the first half, the company recognised GBP100 million in impairments in its Leisure unit, after closing 16 sites that were "structurally unattractive".
Revenue jumped 58% year on year to GBP515.9 million from GBP323.1 million, reflecting the addition of pan-Asian dining chain Wagamama. Like-for-like sales were up 4.0%.
Intu Properties declined 9.7%. The shopping centre owner looks set to be relegation from the FTSE 250 in Wednesday's index review, which will be based on Tuesday's closing prices.
In commodities, Brent oil was quoted at USD57.64 a barrel at the London equities close Tuesday from USD58.38 late Monday.
Gold was quoted at USD1,547.67 an ounce at the London equities close Tuesday against USD1,525.86 at the close on Monday.
In Wednesday's economic calendar, there is an Irish services PMI at 0101 BST followed by PMIs from Japan at 0130 BST and China at 0245 BST. Later in the day, there are services PMI from France, Germany, the eurozone and the UK at 0850 BST, 0855 BST, 0900 BST and 0930 BST respectively.
At 1000 BST, there are eurozone retail sales while the US trade balance is at 1330 BST, with a composite PMI reading at 1445 BST.
In Wednesday's corporate calendar, there are annual results from housebuilder Barratt Developments and home furnishings firm Dunelm. There are first quarter results from bike and car parts retailer Halfords.
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