(Alliance News) - London stocks were lower on Wednesday as tensions between the US and China once again flared up, while the pound remained elevated amid crunch Brexit talks ahead of Thursday's EU summit.
The FTSE 100 stock index was 14.10 points lower, down 0.2%, at 7,197.54 Wednesday midday. The FTSE 250 was down 140.05 points, or 0.7%, at 20,056.92 and the AIM All-Share up 0.6% at 877.14.
The Cboe UK 100 index was down 0.3% at 12,205.04. The Cboe UK 250 was 1.0% lower at 17,982.50 and the Cboe UK Small Companies up 0.1% at 11,079.72.
In mainland Europe, the CAC 40 in Paris and DAX 30 in Frankfurt were down 0.1% and up 0.2% respectively in early afternoon trade.
Stocks were broadly lower, and US futures pointed to a subdued start, after tensions between the US and China re-emerged overnight.
China on Wednesday expressed "strong indignation and firm opposition" to the US House of Representatives' passage of a bill in support of Hong Kong protesters. The Hong Kong Human Rights & Democracy Act requires sanctions against Chinese officials "responsible for undermining fundamental freedoms" in the city.
It also provides an annual review of whether Hong Kong is sufficiently autonomous from Beijing to maintain a special trading status with the US.
Hong Kong is a semi-autonomous Chinese territory, which has for months been rocked by massive pro-democracy protests. Tens of thousands marched in the city on Monday in support of the bill, which still needs to pass through the US Senate.
The bill has put further strain on China-US relations, as the two countries are negotiating an end to their year-long trade war.
"The escalation of tensions between the two countries comes only a day after President Trump postponed the next set of tariff hikes on Chinese imports and doesn't bode well for a resolution in trade friction between the two countries," commented Fiona Cincotta, senior market analyst at City Index.
And, in other negotiations, Brexit talks are to continue Wednesday on a final day of efforts to get a deal ready for a crucial EU summit.
Boris Johnson is running out of time to get an agreement in place so it can be approved by European leaders at the Brussels summit starting on Thursday.
A Number 10 source said progress was still being made in the talks, which ran to about 1.30am in the Belgian capital and will resume on Wednesday morning. Reports had suggested a deal was close ahead of a midnight deadline imposed by the EU, with the prime minister said to be making major concessions on the Irish border.
But sources on both sides of the Channel downplayed the suggestions, and the PM's official spokesman said: "Talks remain constructive but there is more work still to do."
The PM is expected to update his Cabinet on progress in the negotiations on Wednesday afternoon.
"While the latest Brexit situation remains in a state of flux, markets overall seem to remain fairly hopeful that a deal can not only be reached but also pass through Parliament, with the pound trading not far from the five-month high made against the US dollar just yesterday," said David Cheetham at XTB.
The pound was quoted at USD1.2758 Wednesday midday, firm versus USD1.2739 late Tuesday.
The latest Brexit headlines overshadowed some disappointing UK inflation data, with traders shrugging off an anaemic 1.7% annual rise in consumer prices in September.
September's inflation reading missed the market consensus estimate of 1.8%.
The core inflation gauge - excluding volatile food and energy items - came in at 1.7% on an annual basis, up from 1.5% recorded in August.
Inflation data from Europe also missed forecasts on Wednesday, with the annual rate just 0.8% in September, slowing from 1.0% in August. The September reading fell short of the market expectation of 0.9%.
The European Central Bank, which meets next week, aims to maintain at inflation rates of "below, but close to", 2%.
On Wall Street, stocks are pointed towards a lower start. The Dow Jones and S&P 500 are both called down 0.3%, while the Nasdaq Composite is seen 0.2% lower.
In the US economic calendar, retail sales are out at 1330 BST while on the corporate side, Bank of America releases third quarter earnings before the market open and Netflix follows after-hours.
In London, FTSE 100-listed Rio Tinto was down 2.1% after reporting a mixed operational performance in the third quarter.
The Anglo-Australian miner said Pilbara iron ore shipments of 86.1 million tonnes in the three months to the end of September were 5% higher than in the third quarter of 2018. Pilbara iron ore production of 87.3 million tonnes was 6% higher year-on-year and 10% higher quarter-on-quarter, while aluminium production of 789,000 tonnes was 3% lower than the third quarter of 2018.
Rio Tinto kept its guidance for 2019 unchanged, with the exception of bauxite production, which has been revised to around 54 million tonnes from a previously estimated range of 56 million to 59 million tonnes. Aluminium production guidance was revised downwards to around 7.7 million tonnes from 8.1 million to 8.4 million tonnes.
Mediclinic International rose 3.5% after indicating earnings will rise in the first half of its financial year.
For the six months to the end of September, the private hospital group said adjusted earnings before interest, taxes, depreciation and amortisation will increase by around 3.5% from GBP231 million the year before.
This is on revenue that is to grow by 9.0% on a reported basis from GBP1.39 billion the prior year. On a constant currency basis, revenue will increase by 6.5% year-on-year.
Shopping centre owner Hammerson was down 4.3% after being cut to Sector Perform from Outperform by RBC.
Woodford Patient Capital Trust was down 5.6% after Woodford Investment Management late Tuesday served notice of termination in relation to its role as portfolio manager.
During its three-month notice period, Woodford Investment Management has committed to work "collaboratively" with the board and its advisers in order to protect the interests of shareholders.
"The board is in advanced discussions in relation to the ongoing management of the company's portfolio and expects to be in a position to announce details of the new management arrangements shortly," said Woodford Patient Capital.
Earlier on Tuesday, Woodford Patient Capital said the corporate director of the LF Woodford Equity Income Fund had decided to wind the fund up. Link Fund Solutions decided not to re-open the fund, and will be winding it up "as soon as practicable". Woodford Investment Management ceased, with immediate effect, to be the investment manager of LF Woodford Equity Income Fund.
On AIM, ASOS shares surged 21% despite the online fashion retailer admitting it made a mistake in embarking on a "huge" logistical spending plan which has led to a slump in annual profit.
Pretax profit for the 12 months to August 31 fell 68% to GBP33.1 million, despite revenue rising 13% to GBP2.73 billion. At constant currency, revenue was up 12%.
ASOS's UK retail sales climbed 15% to GBP993.4 million, with international climbing 11%, or 10% constant currency, to GBP1.66 billion.
ASOS issued two profit warnings during the year, the first in December after a "significant downturn" in performance during November 2018, and then another in July after warehouse problems in Atlanta, US, and in Berlin.
ASOS said Wednesday the financial and operating performance was "disappointing", with the "huge" investment made more challenging than predicted.
"Although a sharp drop in earnings and a sharp rise in net debt make for ugly reading, this is arguably old news. Investors are now bidding up ASOS's shares because management are confident they have a solution to fix operational issues," said Russ Mould, AJ Bell investment director.
By Lucy Heming; lucyheming@alliancenews.com
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