LONDON MARKET CLOSE: Pound Slips On Brexit Jitters As EU Summit Looms

(Alliance News) - London stocks ended Monday's session firmly in the red as last week's market euphoria died down, with traders monitoring the Brexit situation closely as the upcoming EU summit this week looms.

The FTSE 100 index closed down 33.63 points, or 0.5%, at 7,213.45. The FTSE 250 ended down 111.81 points, or 0.6%, at 19,929.90, and the AIM All-Share closed up 1.17 points, or 0.1%, at 870.45.

The Cboe UK 100 ended down 0.4% at 12,229.76, the Cboe UK 250 closed down 0.7% at 17,846.50, and the Cboe Small Companies ended up 0.3% at 10,976.55.

In European equities on Monday, the CAC 40 in Paris ended down 0.4%, while the DAX 30 in Frankfurt closed down 0.2%

"After a phenomenal end to trading last week, global equities were on the back foot at the start of the new week. As investors took a second look at Brexit and the US – China phase 1 trade agreement, risk off trade dominated," said Fiona Cincotta, senior market analyst at City Index.

UK and EU officials resumed talks in the Belgian capital on Monday with the prospect of an agreement in time for Britain to leave with a deal on October 31 in the balance. Time is rapidly running out if there is to be an agreement to put to EU leaders to sign off on at their two-day summit starting on Thursday.

The EU's chief negotiator Michel Barnier said "technical-level" talks between officials over the weekend had proved "constructive". But in a briefing to ambassadors of the remaining EU27 on Sunday in Brussels, he said that "a lot of work remains to be done".

Meanwhile, UK Prime Minister Boris Johnson on Monday set out his government's priorities at a parliamentary ceremony full of pomp and pageantry attended by the queen, with Brexit top of the agenda.

Queen Elizabeth II announced in a speech to lawmakers a list of 26 new bills ranging from implementing a yet-to-be finalised EU divorce agreement to criminal sentencing and the environment.

"My government's priority has always been to secure the UK's departure from the EU on October 31," the 93-year-old monarch said from a gilded throne, delivering words written by government officials.

The raft of policies outlined included plans for an EU Withdrawal Agreement Bill to enshrine in British law a deal that Johnson is still racing to agree with Brussels. If he fails to get a deal by the EU summit later this week, he risks having to ask Brussels to delay under a law intended to prevent a potentially damaging "no deal" exit.

"There are now just three days remaining until the EU Summit. Whilst there has been a shift in tone by the EU and the UK three days is possibly too little time to secure a deal...If there are no more optimistic words this evening, then we could expect to see the pound start selling off again tomorrow back towards USD1.24 as the time limit draws closer," said Cincotta.

The pound was quoted at USD1.2584 at the London equities close Monday, down compared to USD1.2698 at the close on Friday.

Meanwhile, the euro stood at USD1.1022 at the European equities close Monday, against USD1.1030 at the same time on Friday.

Against the yen, the dollar was trading at JPY108.44, flat on JPY108.51 late Friday.

Stocks in New York were mostly higher at the London equities close, with the Dow Jones up 0.1%, the S&P 500 index flat and the Nasdaq Composite down 0.1%.

US and Chinese officials will hold talks by phone this week and next as they work to finalize the "phase one" trade deal announced last week, US Treasury Secretary Steven Mnuchin has said.

The initial deal, which finally breaks an 18-month trade spat, included a massive increase in China's purchases of US farm products, and also covers intellectual property, financial services and currencies.

"There is a fundamental agreement in principle," Mnuchin said. "There are still some issues that need to be worked out in wording but I would say we have every expectation that phase one will close.

"So I would describe phase one as quite substantial."

In a sign that trade tensions have been taking a toll, data showed China's imports and exports fell more than expected in September.

Globally, China's exports dropped 3.2% in September from the same period last year, while imports dived 8.5%, according to data from the customs administration. The figures were worse than a Bloomberg forecast, which estimated exports to drop 2.8% and imports fall 6.0%.

The EU has also replaced the US as China's top trading partner amid a bruising tariffs spat, with imports from the US down 26.4% on-year in September.

London-listed miners finished lower following the downbeat data from the world's industrial powerhouse, with Anglo American 2.5% lower, Glencore down 2.3% and Rio Tinto dipping 2.2%.

Elsewhere in the FTSE 100, energy provider SSE closed down 2.1% after Credit Suisse cut its rating on the stock to Neutral from Outperform.

In the FTSE 250, Sophos shares closed up 36% at 577.00 pence on news of a takeover offer.

Thoma Bravo has offered USD7.40, or 583p, per Sophos share. Cybersecurity company Sophos closed at 425.5p on Friday in London, meaning the offer price is at a 37% premium. The price values Sophos at GBP3.01 billion, and gives it an enterprise value of GBP3.11 billion when including its debt.

Sophos listed on the London Stock Exchange in July 2015 with 225p share price and GBP1.01 billion market cap.

Sports Direct International closed up 4.0% after calling called for a review of the sportswear market in the UK and Europe, lashing out at brands such as Nike and Adidas for restricting products from retailers.

The FTSE 250-listed sportswear retailer firm noted a Sunday Times piece which reported that Nike has informed independent retailers that access to its products would end in two years, with the newspaper adding that peers Adidas may follow suit.

Sports Direct said: "The sports industry has long been dominated by the 'must-have' brands such as Adidas. These 'must have' brands hold an extremely strong bargaining position vis-à-vis the retailers within their supply networks and use their market power to implement market wide practices aimed at controlling the supply and, ultimately, the pricing of their products."

The industry as a whole would benefit from a "wide market review", the firm added.

In commodities, Brent oil was quoted at USD58.98 a barrel at the London equities close Monday, down from USD60.30 late Friday.

Gold was quoted at USD1,491.04 an ounce at the London equities close Monday, up against USD1,476.20 at the close on Friday.

In Tuesday's UK corporate calendar, there are annual results from housebuilder Bellway, third quarter results from Schroders and a trading statement from Lego Land operator Merlin Entertainments. At 2230 BST there is a quarterly operations review from Anglo-Australian miner Rio Tinto.

In the economic calendar on Tuesday, there is Chinese inflation and producer prices at 0230 BST followed by Japanese industrial production at 0530 BST. UK jobs data is due at 0930 BST while ZEW economist sentiment surveys for Germany and the EU are both out at 1000 BST.

In addition, the latest UK grocery share figures from Kantar will be released at 0800 BST on Tuesday.

By Lucy Heming; lucyheming@alliancenews.com

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