London midday: Banks and builders chip at FTSE gains, pound tanks as Raab resigns
By Michele Maatouk
Date: Thursday 15 Nov 2018
(Sharecast News) - London stocks were up but off earlier highs by midday on Thursday as the pound tumbled in the wake of Brexit Secretary Dominic Raab's resignation, with banks and housebuilders also hit by concerns about the EU divorce process.
The FTSE 100 was up 0.2% to 7,049.37, while the more domestically focused FTSE 250 index was down 0.9%.
Sterling slid 1.5% against the dollar and the euro to 1.2796 and 1.1328, respectively -- suffering its worst drop in more than a year -- after five UK cabinet ministers including Raab resigned less than a day after Prime Minister Theresa May's cabinet "collectively approved" a withdrawal agreement with the European Union.
Hard-right Brexiter Raab said in his resignation letter that he could not "in good conscience" support the deal, particularly over the proposed rules for Northern Ireland and the indefinite "backstop" arrangement that keeps it in the EU's customs and single market regimes.
He was joined by Work and Pensions Secretary Esther McVey and by junior Brexit minister Suella Braverman, junior Northern Ireland minister Shailesh Vara and Anne-Marie Trevelyan, a parliamentary private secretary.
"As the steady drip of resignations hits the government, the UK's deal with the EU appears to be dead in the water already," said Chris Beauchamp, chief market analyst at IG. "Ministers now appear to be resigning at a steady pace, and at this rate the statement to the House today may not even happen... The plummet in sterling has hit housebuilders hard too, as investors fear the sector will be squeezed between rising inflation and a weakening UK economy."
Data out earlier from the Office National Statistics showed retail sales dropped 0.5% last month versus expectations for a 0.2% increase, but September's decline was revised up to 0.4% from 0.8%.
Precious metals miners Randgold and Fresnillo shone as gold prices rallied, but UK-focused stocks such as banks and housebuilders retreated, with RBS, Barclays, Barratt Developments, Persimmon, Taylor Wimpey and Berkeley Group all in the red.
Housebuilders were also weighed by an update from Bovis Homes, which warned that uncertainty about Brexit had put off discretionary homebuyers.
George Salmon, equity analyst at Hargreaves Lansdown, said: "Bovis typifies how the UK housebuilders are dividing opinion in the markets. Greg Fitzgerald has done a sterling job of improving the group's operating performance and balance sheet, and the shares offer an attractive yield of 10%. All the while, supportive government policies like Help to Buy are providing a tailwind.
"However, Brexit is proving to be a fly in the ointment. The housing market is already slowing, and the worry is it grinds to a halt in the event of a disorderly Brexit - which would clearly be bad news for the builders. A weak secondary market means around 15% ofBovis' transactions now rely on part-exchange, hardly reassuring. Overall, the sector looks something of a binary bet at the moment."
Elsewhere, Royal Mail slumped as it reported revenue up 1% but a 25% decline in operating profits for the first half of the year. Chief executive Rico Back said a range of actions had been put in place to improve performance and confirmed the board's commitment to cut £100m of costs and generate adjusted group operating profit before transformation costs of £500-550m for the financial year.
Capita tumbled a day after it emerged that the outsourcer had failed to deliver thousands of cervical cancer screening letters to patients as part of a contract with NHS England.
Bunzl, GlaxoSmithKline, Sainsbury, Marks & Spencer, Royal Dutch Shell, Dunelm, Genus, Sophos and Spire Healthcare were among the companies whose stock went ex-dividend.
Market Movers
FTSE 100 (UKX) 7,049.37 0.22%
FTSE 250 (MCX) 18,742.26 -0.89%
techMARK (TASX) 3,402.49 0.44%
FTSE 100 - Risers
Evraz (EVR) 549.40p 5.69%
Fresnillo (FRES) 860.40p 5.21%
Randgold Resources Ltd. (RRS) 6,308.00p 4.96%
Smiths Group (SMIN) 1,439.00p 3.97%
Coca-Cola HBC AG (CDI) (CCH) 2,397.00p 3.36%
Wood Group (John) (WG.) 655.00p 3.15%
Antofagasta (ANTO) 784.80p 3.02%
Relx plc (REL) 1,631.00p 2.77%
Unilever (ULVR) 4,250.20p 2.69%
Diageo (DGE) 2,799.50p 2.66%
FTSE 100 - Fallers
Royal Bank of Scotland Group (RBS) 230.00p -7.30%
Royal Mail (RMG) 323.50p -7.04%
Persimmon (PSN) 2,191.00p -6.85%
Barratt Developments (BDEV) 508.80p -6.78%
Taylor Wimpey (TW.) 151.50p -6.54%
Berkeley Group Holdings (The) (BKG) 3,443.00p -5.88%
easyJet (EZJ) 1,177.50p -5.80%
Marks & Spencer Group (MKS) 288.70p -5.06%
ITV (ITV) 150.95p -4.91%
3i Group (III) 818.60p -4.81%
FTSE 250 - Risers
Intermediate Capital Group (ICP) 1,010.00p 9.31%
Spirent Communications (SPT) 121.20p 5.21%
Hochschild Mining (HOC) 156.85p 4.18%
Cobham (COB) 102.50p 3.72%
Centamin (DI) (CEY) 96.76p 3.55%
Fidelity China Special Situations (FCSS) 201.00p 3.50%
Cairn Energy (CNE) 193.40p 3.31%
Spectris (SXS) 2,150.00p 2.92%
JPMorgan Emerging Markets Inv Trust (JMG) 810.79p 2.76%
Spirax-Sarco Engineering (SPX) 6,770.00p 2.73%
FTSE 250 - Fallers
Capita (CPI) 116.05p -7.71%
Amigo Holdings (AMGO) 252.95p -7.33%
Bovis Homes Group (BVS) 965.03p -7.25%
OneSavings Bank (OSB) 359.20p -6.65%
Countryside Properties (CSP) 290.80p -6.62%
Games Workshop Group (GAW) 2,945.00p -6.36%
Redrow (RDW) 529.00p -6.12%
Crest Nicholson Holdings (CRST) 335.40p -5.95%
Thomas Cook Group (TCG) 48.32p -5.35%
Premier Oil (PMO) 88.85p -5.18%
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