London close: Retailers crash, PM dubs second referendum "betrayal'
By Alexander Bueso
Date: Monday 17 Dec 2018
(Sharecast News) - London stocks fell into the red on Monday, with retailers pacing the decline as a shock profit warning from Asos suggested that online players were not immune to the struggles of their bricks-and-mortar rivals.
The FTSE 100 was down 1.05% or 71.93 points at 6,773.24, while the pound was up 0.21% against the dollar at 1.26078 but down by 0.11% versus the euro at 1.1115 as Prime Minister Theresa May told the House of Commons that a vote on her Brexit plan would go forward during the week starting on 14 January.
May also said a second referendum would be a "betrayal" of voters.
But even as May tried desperately to avoid the prospect of a second referendum, Business Secretary Greg Clark said MPs should be allowed to select their preferred Brexit option if May's contentious deal failed to get through parliament.
"Brexit will continue to be a source of potentially extreme volatility for the pound over the next couple of weeks as Theresa May scrambles around trying to save what's left of her deal while everyone around her schemes to kill it and remove her and/or the government," said Oanda analyst Craig Erlam.
"The odds are stacked against her at this point and her "friends" in Europe are in no rush to offer a lifeline. With support for a second referendum gathering momentum over the weekend, there is no incentive for them to back down on the issue of the backstop. It seems there are a number of steps that come before parliament accepts a no deal, which may force the EU into concessions, at least one of which could realistically see the UK remain in the block after all."
On the corporate front, retailers were in focus as AIM-listed Asos tumbled 38% as it joined in the high street gloom, downgrading its guidance for the year as weaker trading in November and heavy discounting took their toll.
Asos cut its sales growth guidance for the year to August 2019 to around 15% from 20-25%, while EBIT margin expectations were reduced to 2% from 4% and the company said it would cut capital expenditure by £200m. The group said retail gross margin would drop by 1.5 percentage points during the year compared to previous guidance that it would be flat at 49.9%.
Shares in AIM rival Boohoo also took a hit even as it scrambled to set itself apart from Asos and looked to reassure investors with a very brief update in which it confirmed that trading remains strong, with record Black Friday sales. Quiz was also under the cosh.
Retailers were weaker across the board, with Ocado, Next, Marks & Spencer, Primark owner Associated British Foods, Kingfisher, Dunelm, JD Sports, Dixons, Sports Direct and Ted Baker all trading lower.
Neil Wilson, chief market analyst at Markets.com, said: "If Asos is finding it tough out there, then just about every retail stock has problem. We knew the high street was struggling due to structural shifts, but Asos slashing guidance suggests things are even worse in the run up to Christmas than previously thought for the sector and the strife extends well beyond the high street."
"Next's online business has more than offset weaker in store sales, so the warning from Asos is a worry. In short, online businesses have seemed immune but the warning from Asos today suggests they too are at risk from the cyclical slowdown. We must stress that the Asos warning is indicative of a cyclical slowdown rather than being suggestive of the structural problems facing the high street."
Housebuilders were also on the back foot, with Persimmon, Taylor Wimpey, Barratt Developments and Berkeley all down after Rightmove's latest survey showed house prices fell again in December, making the drop over the last two months the biggest since 2012.
House prices declined 1.5% this month compared with a 1.7% drop the month before, marking the biggest fall over two consecutive in six years as sellers try to attract buyers despite a combination of the Christmas slowdown, stretched affordability and political uncertainty.
On the year, house prices were up 0.7% versus a 0.2% decline in November.
Rightmove director and housing market analyst Miles Shipside said: "It's usual for new-to-the - market sellers to price lower in the run-up to Christmas to tempt distracted buyers, so we should not read too much into the mere fact of two consecutive monthly falls .
"However, these falls have been larger than usual, making this the largest fall over two months for six years, showing that there are more than just seasonal forces at play. With stretched affordability limiting some people's ability to buy for the first time or trade up, a modest lowering of property prices combined with an increase in wage growth could help more of them to move and thus increase transaction numbers."
Elsewhere, Standard Chartered was weaker after saying it has agreed the terms for the sale of its private equity division and that it expects to take a restructuring charge of about $160m from the sale.
Energy supplier SSE lost ground as it pulled out of its planned merger with Innogy's Npower retail unit, saying the two companies could not agree on commercial terms.
Energy services group Hunting was in the red as it said results to the end of November had remained in line with expectations, but sounded a note of caution over its 2019 outlook with the possibility of deferred orders.
BHP Group was the standout gainer as it announced a share buyback and a special dividend after selling off its US oil and gas assets. Peers pushed higher, with Rio Tinto, Anglo American, Glencore and Antofagasta all up.
Market Movers
FTSE 100 (UKX) 6,773.24 -1.05%
FTSE 250 (MCX) 17,416.96 -1.41%
techMARK (TASX) 3,318.73 -1.24%
FTSE 100 - Risers
BHP Group (BHP) 1,659.80p 2.67%
Rio Tinto (RIO) 3,764.00p 2.41%
Antofagasta (ANTO) 796.00p 2.31%
Glencore (GLEN) 292.95p 1.14%
Smiths Group (SMIN) 1,384.00p 0.87%
Anglo American (AAL) 1,707.60p 0.78%
Relx plc (REL) 1,639.00p 0.61%
Just Eat (JE.) 579.00p 0.35%
WPP (WPP) 870.80p 0.16%
ITV (ITV) 130.00p 0.12%
FTSE 100 - Fallers
Wood Group (John) (WG.) 535.00p -5.78%
NMC Health (NMC) 2,910.00p -4.96%
GVC Holdings (GVC) 686.00p -4.92%
Next (NXT) 4,137.00p -4.63%
Marks & Spencer Group (MKS) 251.30p -4.59%
easyJet (EZJ) 1,051.50p -4.58%
Ocado Group (OCDO) 779.20p -4.39%
Kingfisher (KGF) 216.00p -4.17%
Randgold Resources Ltd. (RRS) 6,674.00p -3.86%
Royal Mail (RMG) 284.90p -3.85%
FTSE 250 - Risers
Superdry (SDRY) 430.80p 6.37%
TalkTalk Telecom Group (TALK) 121.50p 3.85%
Vivo Energy (VVO) 122.50p 3.81%
Stobart Group Ltd. (STOB) 155.60p 3.18%
Energean Oil & Gas (ENOG) 587.00p 3.16%
Ted Baker (TED) 1,512.00p 2.65%
Lancashire Holdings Limited (LRE) 608.50p 2.61%
G4S (GFS) 190.40p 2.59%
Daejan Holdings (DJAN) 5,790.00p 2.12%
Hikma Pharmaceuticals (HIK) 1,882.50p 2.12%
FTSE 250 - Fallers
Dunelm Group (DNLM) 485.00p -10.27%
JD Sports Fashion (JD.) 330.10p -7.12%
Equiniti Group (EQN) 196.80p -6.73%
Games Workshop Group (GAW) 2,855.00p -6.55%
Galliford Try (GFRD) 569.00p -6.34%
Card Factory (CARD) 162.60p -5.63%
Plus500 Ltd (DI) (PLUS) 1,292.00p -5.21%
Hunting (HTG) 488.00p -4.97%
B&M European Value Retail S.A. (DI) (BME) 285.20p -4.90%
Thomas Cook Group (TCG) 27.24p -4.89%
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