London open: Stocks slide as profit warnings, US-China tensions weigh

Tue 19 Jun 2018

LONDON (SHARECAST) - (Sharecast News) - London stocks fell in early trade on Tuesday as escalating tensions between the US and China and profit warnings soured sentiment.
The FTSE 100 was down 0.9% to 7,560.48, while the pound was 0.3% lower against the dollar at 1.3206 and 0.1% firmer versus the euro at 1.1409.

On Monday, US President Donald Trump instructed his country's trade representative to identify a new $200bn-worth of goods on which to levy 10% tariffs. He also called for a separate list to be prepared detailing a further $200bn-worth of Chinese goods that could be targeted if Beijing responded with countermeasures of its own.

The moves overnight followed Beijing's decision to retaliate for the duties on $50bn worth of Chinese goods that Washington had announced last week.

China's Ministry of Commerce responded immediately on Tuesday morning, describing the move as "extreme pressure and blackmail".

Trump said in his statement that by retaliating with its own tariffs rather than altering its practices, China was "threatening US companies, workers, and farmers who have done nothing wrong".

Analysts at Rabobank said: "In short, the markets had already been worried that another $100bn of tariffs could potentially be imposed, even if they were not actually pricing for that, but this has now doubled to $200bn, and perhaps to $400bn. Given China only exported $505bn of goods to the US in 2017, and that steel and aluminium are already subject to new tariffs, there is potentially around 90% of what China sells to the US might soon be subject to at least a 10% tariff.

"As if that wasn't enough bad news for China, the US Senate also passed an amendment to the Defence Bill 85-10 that includes a measure to kill the recent deal Trump made to save Chinese tech giant ZTE. Of course, there is still the House of Representatives to pass first before the damage is done, but the firm's shares have tanked again, and the president is going to have to be very persuasive given the way the political winds are blowing on China in the US."

In UK corporate news, profit warnings were the order of the day, with retirement housebuilder McCarthy & Stone and retailer Debenhams both in the frame.

Shares in McCarthy tanked after it issued a profit warning amid increased caution from potential customers and announced the early retirement of its chief executive. An anticipated strong spring selling season failed to materialise and the FTSE 250 company said it now forecast flat or lower sales completions for the financial year ending 31 August, meaning profits could fall between 17% and 32% to an expected operating profit range of 65-80m.

Debenhams was also sharply lower as it warned that annual profit will be at least 20% less than market expectations as the department store chain faces weak consumer spending and discounting by competitors. Pre-tax profit for the current financial year will be in the range of 35-40m compared with analysts' average forecast of 50.3m, it said.

Elsewhere, Ashtead Group fell even as it reported a jump in full-year underlying pre-tax profit thanks in part to hurricanes boosting demand, while Telecom Plus dropped as it posted a 7.1% rise in full-year revenue.

Housebuilder and urban regeneration partner Countryside Properties was in the red after saying it has expanded its strategic partnership with Sigma Capital Group to deliver a further 5,000 private rental sector homes over the next three years.

Bucking the trend, satellite group Inmarsat rallied following a report that US rival EchoStar Corp is considering upping its offer for the company after its initial approach was rejected for being too low. According to Bloomberg, EchoStar is working with financial advisers on its bid.

Ferguson gained after the plumbing and heating products distributor, formerly known as Wolseley, posted a 17.1% jump in third-quarter trading profit thanks to strong US residential markets.

Capita rallied as it agreed to sell its Supplier Assessment Services unit for 160m in cash and after union Unite said a day earlier that the outsourcer had been awarded a British Ministry of Defence contract, beating rival Serco.

In broker note action, Ferrexpo was upgraded to 'buy' at HSBC, while Informa was cut to 'hold' at Peel Hunt.

Market Movers

FTSE 100 (UKX) 7,560.48 -0.93%
FTSE 250 (MCX) 20,842.18 -0.75%
techMARK (TASX) 3,522.63 -0.81%

FTSE 100 - Risers

Ferguson (FERG) 6,001.00p 1.88%
Just Eat (JE.) 789.80p 0.36%
Unilever (ULVR) 4,056.50p 0.35%
Royal Mail (RMG) 505.60p 0.20%
British Land Company (BLND) 686.30p 0.10%
Diageo (DGE) 2,745.00p 0.05%
Severn Trent (SVT) 1,864.50p 0.05%
Land Securities Group (LAND) 951.30p 0.03%
Ashtead Group (AHT) 2,372.00p 0.00%
Imperial Brands (IMB) 2,594.95p -0.02%

FTSE 100 - Fallers

Ocado Group (OCDO) 917.00p -4.38%
Glencore (GLEN) 369.00p -3.04%
Anglo American (AAL) 1,681.60p -2.97%
BHP Billiton (BLT) 1,630.80p -2.87%
Rio Tinto (RIO) 4,141.00p -2.75%
Burberry Group (BRBY) 2,109.00p -2.59%
Antofagasta (ANTO) 995.40p -2.36%
Smith (DS) (SMDS) 536.80p -2.33%
Barclays (BARC) 190.92p -2.07%
Micro Focus International (MCRO) 1,346.50p -1.68%

FTSE 250 - Risers

Inmarsat (ISAT) 544.80p 3.93%
Capita (CPI) 157.15p 3.22%
Alfa Financial Software Holdings (ALFA) 190.80p 1.92%
Euromoney Institutional Investor (ERM) 1,412.00p 1.29%
GCP Infrastructure Investments Ltd (GCP) 122.48p 0.72%
Syncona Limited NPV (SYNC) 224.50p 0.67%
Riverstone Energy Limited (RSE) 1,226.60p 0.38%
Rank Group (RNK) 189.60p 0.32%
Jardine Lloyd Thompson Group (JLT) 1,292.00p 0.31%
BTG (BTG) 521.50p 0.29%

FTSE 250 - Fallers

Kaz Minerals (KAZ) 883.03p -3.41% Group (MONY) 313.20p -3.06%
Telecom Plus (TEP) 1,033.02p -2.91%
Premier Oil (PMO) 108.00p -2.70%
Vedanta Resources (VED) 674.26p -2.65%
Millennium & Copthorne Hotels (MLC) 520.00p -2.62%
Fidelity China Special Situations (FCSS) 255.65p -2.61%
Greene King (GNK) 620.00p -2.33%
Edinburgh Dragon Trust (EFM) 363.00p -2.16%
Petrofac Ltd. (PFC) 540.67p -2.05%
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