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London close: Investors cautious ahead of possible leadership challenge

By Alexander Bueso

Date: Friday 16 Nov 2018

London close: Investors cautious ahead of possible leadership challenge

(Sharecast News) - London stocks finished the week lower, as did Sterling, as investors hedged their bets ahead of a weekend that might see Tory rebels push for a confidence vote against the Prime Minister.
Indeed, according to Capital Economics, the odds of a 'no-deal' Brexit had risen to 50:50 as a result of the past week's events; however, the chances of the UK finally staying in the European Union had also increased, its analysts judged.

In an "orderly" no-deal scenario, that is to say, one where London clinches agreements on certain issues, like aviation, customs checks and visas, then the short-term economic damage would be limited, perhaps, to around a full percentage point of growth, the research house said.

But if it were "disorderly", meaning that none of those agreements in place, then the hit to the economy might be as high 3% of GDP and Britain would likely fall into a recession.

Against that backdrop, the FTSE 100 was down 0.34% or 24.13 points to 7,013.88 on Friday, while the pound was bouncing by 0.53% against the dollar to 1.2842 but off by 0.15% versus the euro at 1.1262, a day after suffering its worst session since the October 2016 'flash crash' in the wake of a number of key cabinet resignations.

For the week, the top-flight index gave back 91.46 points while the pound was down by 0.94% versus the Greenback.

Analysts at Rabobank meanwhile said the chances of a hard Brexit were almost as high as those of getting an orderly Brexit, adding that "the rest of the year will be characterised by high uncertainty and high tensions."

On a more optimistic note, their peers at TD Securities said: "A confidence vote in May's leadership is now looking likely. With the news that Gove is remaining in cabinet, however, we think she'll (just) survive, with 158+ votes from the 315 Conservative Party MPs.

"Market reaction heading into the vote should be negative over high uncertainty, but a May victory should yield a positive tone as it locks her in power for 12 months."

Critically, overnight one minister, Michael Gove, Environment Secretary and a staunch Brexiter, confirmed reports that he had turned down the role of Brexit Secretary but said he was not quitting cabinet over the Brexit deal and would say on to help May to sell her deal to parliament. "It's absolutely vital that we focus on getting the right deal in the future," he told reporters.

Spreadex analyst Connor Campbell said sterling was "taking good news where it could get it", managing a "meek rebound" as investors processed the latest "non-resignations".

In the background meanwhile, strategists at Bank of America-Merrill Lynch were telling clients to sell rallies in shares, pointing to the recent ongoing weakness in Bitcoin, the first asset price to "crack" in 2018, explaining that it was still "cracking".

Related to the above, BofA-ML believed that the ingredients of a "flash crash" were rising.

"Ingredients of flash crash rising...bond/FX/equity vol all trending up, vicious deleveraging events, dislocation risk via abnormal spreads (e.g. 295bps Libor-Euribor last seen Oct'99 - Chart 6)...triggers could be violent US dollar move and/or shock macro data forcing abrupt GDP & EPS downgrades," they said in a research note sent to clients.

There was no let-up for stocks with exposure to the UK such as banks and housebuilders, with RBS, Lloyds, Persimmon and Barratt Developments all in the red.

AstraZeneca retreated as it said that a phase 3 trial of its Imfinzi drug showed that it was no better than chemotherapy in treating patients with non-small cell lung cancer that has spread to other organs.

Shire fell even as the biopharmaceutical group said that a phase 3 trial of its lanadelumab drug showed that it significantly reduced the number of attacks of hereditary angioedema in patients treated with 300 mg every two weeks.

On the upside, safety and health technology group Halma gained as it announced the acquisition of radar surveillance and safety solutions provider Navtech Radar for £21m on a cash- and debt-free basis, funded from Halma's existing facilities.

Cigarette maker Imperial Brands was in the green after saying it was developing a version of electronic cigarettes that could be locked to prevent possible underage use, after a fresh US regulatory crackdown on vaping. The announcement from Imperial came a day after the US Food and Drug Administration announced new restrictions on flavoured e-cigs.

Kier rallied as the construction company expressed confidence about meeting its full year 2019 expectations and said that its order books and development pipelines remain strong.

Gold miner Centamin shone after an upgrade to 'overweight' at Morgan Stanley, while outsourcer Capita was on the front foot following heavy losses earlier in the week, when it came under fire for an NHS cervical cancer screening blunder.

Market Movers

FTSE 100 (UKX) 7,013.88 -0.34%
FTSE 250 (MCX) 18,608.99 -0.29%
techMARK (TASX) 3,379.33 -0.40%

FTSE 100 - Risers

Paddy Power Betfair (PPB) 7,235.00p 3.95%
Micro Focus International (MCRO) 1,463.50p 3.76%
Rio Tinto (RIO) 3,916.00p 3.04%
Experian (EXPN) 1,886.50p 2.33%
TUI AG Reg Shs (DI) (TUI) 1,284.00p 2.19%
Smurfit Kappa Group (SKG) 2,302.00p 2.13%
Halma (HLMA) 1,336.00p 2.06%
Fresnillo (FRES) 866.40p 1.93%
Antofagasta (ANTO) 810.80p 1.86%
Rightmove (RMV) 440.00p 1.84%

FTSE 100 - Fallers

Melrose Industries (MRO) 171.45p -6.05%
Royal Bank of Scotland Group (RBS) 216.90p -3.26%
Royal Mail (RMG) 316.00p -2.89%
British American Tobacco (BATS) 2,707.00p -2.45%
Coca-Cola HBC AG (CDI) (CCH) 2,299.00p -2.42%
CRH (CRH) 2,146.00p -2.28%
Wood Group (John) (WG.) 649.60p -2.17%
Prudential (PRU) 1,557.50p -2.17%
Persimmon (PSN) 2,133.74p -2.08%
National Grid (NG.) 823.00p -2.04%

FTSE 250 - Risers

Intermediate Capital Group (ICP) 993.00p 4.47%
Centamin (DI) (CEY) 102.40p 4.26%
TP ICAP (TCAP) 304.40p 4.21%
Kier Group (KIE) 857.00p 3.88%
Kaz Minerals (KAZ) 527.20p 3.01%
Investec (INVP) 499.80p 2.84%
Vivo Energy (VVO) 110.88p 2.67%
Ferrexpo (FXPO) 219.70p 2.66%
HICL Infrastructure Company Ltd (HICL) 158.60p 2.45%
Auto Trader Group (AUTO) 429.40p 2.29%

FTSE 250 - Fallers

Cairn Energy (CNE) 185.00p -4.93%
Charter Court Financial Services Group (CCFS) 265.00p -4.68%
Thomas Cook Group (TCG) 46.58p -4.67%
Contour Global (GLO) 158.00p -4.65%
AA (AA.) 94.66p -4.23%
Softcat (SCT) 620.00p -4.17%
Euromoney Institutional Investor (ERM) 1,246.00p -4.15%
Brewin Dolphin Holdings (BRW) 331.00p -4.00%
TBC Bank Group (TBCG) 1,582.00p -3.89%
Rank Group (RNK) 153.60p -3.76%

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