LONDON MARKET CLOSE: FTSE Ends Lower; Pound Tumbles On Brexit Concerns

(Alliance News) - The FTSE 100 stumbled on Tuesday under the weight of global economic growth worries and apprehension ahead of US-China trade talks this week, though a sliding pound cushioned the index from slightly steeper losses seen elsewhere in Europe.

Sterling tumbled towards the USD1.22 mark as relations soured between the UK and EU ahead of next week's summit.

The FTSE 100 index closed down 54.73 points, or 0.8%, at 7,143.15. The FTSE 250 ended down 219.34 points, or 1.1%, at 19,200.90, and the AIM All-Share closed closed down 5.73 points, or 0.7%, at 857.33.

The Cboe UK 100 ended down 0.5% at 12,145.47, the Cboe UK 250 closed down 1.3% at 17,133.72, and the Cboe Small Companies ended flat at 10,815.77.

In European equities on Tuesday, the CAC 40 in Paris ended down 1.2%, while the DAX 30 in Frankfurt ended 1.1% lower.

"European stocks tumbled on Tuesday as investor concerns over Brexit, the US–China trade dispute and the health of the US economy weighed on risk appetite," said Fiona Cincotta, senior market analyst at City Index.

The FTSE 100 was "the best of a bad bunch" in Europe, she added, due to the pound sinking.

The host of next week's European summit, EU Council President Donald Tusk, on Tuesday accused UK Prime Minister Boris Johnson of trying to shift blame for the failure of Brexit talks.

"What's at stake is not winning some stupid blame game," Tusk declared, in a Twitter message addressed directly to the British leader.

"At stake is the future of Europe and the UK as well as the security and interests of our people. You don't want a deal, you don't want an extension, you don't want to revoke, quo vadis?" he said, using Latin for "where are you going?"

Tusk, whose council represents the leaders of EU member states, was reacting after Downing Street said Germany's Angela Merkel had warned Johnson that a deal is now "overwhelmingly unlikely".

Johnson's Brexit envoy, diplomat David Frost, is in Brussels for technical talks on a possible withdrawal agreement to put to EU leaders at next week's Brussels summit. But the two sides are still far apart over future customs arrangements for Northern Ireland, and EU officials were forced to deny reports from London that talks are close to breaking down.

On Wednesday, Barnier is to brief the European Commission and officials have said the talks must lead to a legal text by Friday if they are to be considered at the October 17-18 summit.

The pound was quoted at USD1.2204 at the London equities close Tuesday, lower compared to USD1.2321 at the close on Monday.

Meanwhile, the euro stood at USD1.0959 at the European equities close Tuesday, against USD1.0992 at the same time on Monday.

Stocks in New York were firmly in the red at the London equities close, with the Dow Jones down 1.1%, the S&P 500 index down 1.2%, and the Nasdaq Composite 1.1% lower.

Reigniting fears over the health of the US economy, data from the Labor Department showed US producer prices fell unexpectedly in September.

Year-on-year, producer prices were up 1.4%, slower than the 1.8% annual rise recorded in August and below market forecasts, as cited by FXStreet, of a 1.8% advance.

These figures came as the new director of the International Monetary Fund warned the world's economy has shifted from a joint upward momentum to a "synchronized slowdown".

In her first speech as head of the IMF, Kristalina Georgieva noted that because of trade tensions "worldwide manufacturing activity and investment have weakened substantially," which is liable to have knock-on effects on the services sector.

"This widespread deceleration means that growth this year will fall to its lowest rate since the beginning of the decade," she said.

US Federal Reserve Chair Jerome Powell will be speaking later on Tuesday, at 1930 BST, and will also speak at 1600 BST on Wednesday ahead of the release of Federal Open Market Committee minutes at 1900 BST.

"Evidence is mounting that the US economy is cooling rather than sliding into recession. Investors will look towards Fed Chair Powell when he speaks later today on monetary policy for clues as to what the Fed intends to do in light of last week's distinctly average data," said City Index's Cincotta.

In the FTSE 100, the London Stock Exchange Group ended as the worst performer, down 5.3% as its Hong Kong suitor backed off.

Hong Kong Exchanges & Clearing made a GBP29.6 billion offer, or GBP31.6 billion including debt, for LSEG in mid-September. The bid was rejected later that month by LSEG.

"The board of HKEX continues to believe a combination of LSEG and HKEX is strategically compelling and would create a world-leading market infrastructure group," said HKEX on Tuesday.

"Despite engagement with a broad set of regulators and extensive shareholder engagement, the board of HKEX is disappointed it has been unable to engage with the management of LSEG in realising this vision, and as a consequence has decided it is not in the best interests of HKEX shareholders to pursue this proposal."

Airlines in London ended lower as an update from easyJet sparked a 7.9% decline in the low-cost flier's shares.

This was despite easyJet saying it saw "robust" customer demand, with self-help initiatives "driving outperformance" in passenger and ancillary revenue per seat.

As a result, easyJet expects headline pretax profit of between GBP420 million and GBP430 million - in the upper half of the airline's guidance range. In the year ending September 30, 2018, the airline recorded GBP578 million in headline pretax profit.

"Yesterday the stock hit its highest level since early May, so it would appear much of the good news was priced in, which explains the negative move today," commented David Madden at CMC Markets.

British Airways owner International Consolidated Airlines ended down 2.0%, while Ryanair shed 1.7%.

Another group ending in the red on Tuesday were recruitment firms, knocked by a downbeat update from PageGroup.

PageGroup - shares ending down 11% - said the deterioration in trading conditions seen during the third quarter across the majority of its regions is anticipated to continue, citing worsening macro-economic indicators in Germany and the US.

Looking ahead, due to continued uncertainty and PageGroup's limited forward visibility, the group expects operating profit for 2019 to be in the range of GBP140 million to GBP150 million. In 2018, PageGroup's operating profit was GBP142.5 million.

Peer Hays, which releases a trading statement next week, ended down 3.6% in a negative read-across, while Robert Walters - which separately on Tuesday reported net fee income growth slowed to 2% at constant currency in the third quarter - ended down 5.5%.

Ending in the green was mid-cap electronics distributor Electrocomponents, up 2.0%.

The firm said it expects to report 5% revenue growth in the six months to the end of September, thanks to continued "strong" performance in its Industrial division. The Digital unit, meanwhile, performed broadly in line during the period, Electrocomponents noted.

Electrocomponents said that it was pleased with its performance in the period and remains on track to deliver "good progress" for the year.

In the UK corporate calendar on Wednesday, there are annual results from ventilation products supplier Volution Group and interim results from vehicle retailer Vertu Motors.

In commodities, Brent oil was quoted at USD57.86 a barrel at the London equities close Tuesday, down from USD59.22 late Monday.

Gold was quoted at USD1,503.60 an ounce at the London equities close Tuesday, up against USD1,501.30 at the close on Monday.

By Lucy Heming; lucyheming@alliancenews.com

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