|CATEGORY: MARKET REPORT - MIDDAY
Thu 06 Dec 2018
LONDON (SHARECAST) - (Sharecast News) - London's FTSE 100 hit a two-year low just before midday on Thursday, joining a broader market selloff as the arrest of Huawei's chief financial officer sparked renewed concerns about Sino-US trade relations.
The FTSE 100 was down 2.3% at 6,760.28, hitting its lowest level since December 2016, with only five companies' shares in positive territory. The more domestically focused FTSE 250 was 2.8% lower at 17,769.11.
Stocks across Europe were under the cosh, with the benchmark Stoxx 600 index, Germany's DAX and France's CAC 40 all at least 2.3% weaker. Meanwhile, US futures also pointed to sharp losses on Wall Street, with Dow and S&P 500 futures down 1.8% and Nasdaq futures 2.4% lower.
In currency markets, the pound was up 0.1% against the dollar and the euro at 1.2742 and 1.1238, respectively.
Investors were feeling jittery as it emerged that the chief financial officer of Chinese telecoms company Huawei, Meng Wanzhou, was arrested in Canada over the weekend and faces extradition to the US over possible violations of sanctions against Iran. China has urged both Canada and the US to "rectify wrongdoing".
Chris Beauchamp, chief market analyst at IG, said the arrest "threatens to undo what little good work came out of the G20 meeting at the weekend, and that Beijing will respond with an escalation of trade tensions".
"Already worried about the economic effects of trade wars, investors are now concerned that this will move beyond the realms of tariffs and into much broader economic and diplomatic conflict, with dire implications for global economic growth. In this kind of environment, equities look overvalued, and thus we should expect the losses to deepen from here."
David Cheetham, chief market analyst at XTB, said that while the arrest was making the headlines, it was more likely to be a case of the straw that broke the camel's back, as serious doubts as to the substance of the truce between the US and China emerge.
"Differing accounts from both sides on what the agreement actually entailed were the first warning sign and while the US, and Trump in particular, were quick to laud it as a key breakthrough, upon reflection in the cold light of day it appears that not much has actually changed," he said.
Oil prices were on the slide, with West Texas Intermediate down 3.1% at $51.30 a barrel and Brent crude 3% lower at $59.78 after Saudi Arabia's energy minister dashed hopes of any steep production cuts at the OPEC meeting in Vienna. Khalid Al-Falih told reporters that no agreement had been reached yet on a production cut and suggested that reducing output by one million barrels a day would be sufficient.
Neil Wilson, chief market analyst at Markets.com, said: "Whilst the comments are significant coming from the de facto OPEC leader, we would still assume that OPEC will agree a curb to output.
"OPEC meetings are always rife with these kind of rumours and misdirection and it is wise to try to cut through the noise. The Saudis may well be talking up this risk as part of the game to get the other OPEC members and non-member allies on side."
There were heavy losses across the board amid the risk-off mood, with the five stocks in positive territory at midday including British American Tobacco, precious metals miner Randgold Resources, together with utilities National Grid, Severn Trent and United Utilities. Imperial Brands, Diageo and Unilever were close to flat.
"All these are considered to be defensive stocks, offering goods and services people would buy regardless of economic conditions," said Russ Mould, investment director at AJ Bell. "Diageo is perhaps an exception as an alcohol seller yet investors often turn to large, robust business in times of strife. That may also explain why Unilever and Compass declined much less than the broader market."
Scandal-hit Ted Baker also bucked the trend following recent heavy declines, after it confirmed the appointment of an independent law firm to carry out an investigation into reports of "forced hugging" by founder and chief executive Ray Kelvin, as it posted a dip in revenues in the 16 weeks to 1 December.
In individual company news, packaging group DS Smith slumped despite saying it grew profits 28% in the first half of the year as acquisitions and solid organic growth combined with an increased return on sales margin.
William Hill and Ladbrokes owner GVC Holdings fell on news that Britain's gambling companies have voluntarily agreed to stop advertising during live televised sport.
Just Eat and Royal Mail retreated as it emerged that they will be booted out of the FTSE 100 as of 24 December, replaced by insurer Hiscox and Spirax-Sarco Engineering following the latest quarterly review.
Specialist insurer Beazley slid as it said its early estimate of the cost of claims from the recent California wildfires is $40m (£31m), net of reinsurance. The company said investment markets continue to be volatile and its year to date investment return to 30 November 2018 was 0.5% ($27m).
FTSE 100 (UKX) 6,760.28 -2.33%
FTSE 250 (MCX) 17,769.11 -2.75%
techMARK (TASX) 3,355.35 -1.64%
FTSE 100 - Risers
British American Tobacco (BATS) 2,756.50p 1.08%
National Grid (NG.) 828.10p 0.32%
Severn Trent (SVT) 1,858.00p 0.30%
United Utilities Group (UU.) 757.20p 0.16%
Randgold Resources Ltd. (RRS) 6,390.00p 0.13%
Imperial Brands (IMB) 2,370.50p -0.06%
Diageo (DGE) 2,806.50p -0.20%
Relx plc (REL) 1,601.75p -0.51%
Unilever (ULVR) 4,215.00p -0.60%
Pearson (PSON) 920.00p -0.71%
FTSE 100 - Fallers
Melrose Industries (MRO) 153.25p -7.87%
Antofagasta (ANTO) 764.60p -6.51%
Just Eat (JE.) 531.20p -5.98%
Prudential (PRU) 1,415.00p -5.95%
Schroders (SDR) 2,367.00p -5.66%
Scottish Mortgage Inv Trust (SMT) 465.00p -5.24%
GVC Holdings (GVC) 687.00p -4.91%
Rolls-Royce Holdings (RR.) 790.00p -4.75%
Legal & General Group (LGEN) 230.27p -4.69%
Wood Group (John) (WG.) 597.80p -4.54%
FTSE 250 - Risers
Genus (GNS) 2,494.00p 7.78%
Telecom Plus (TEP) 1,416.00p 3.06%
Ferrexpo (FXPO) 187.20p 1.77%
Ted Baker (TED) 1,488.00p 1.43%
Bakkavor Group (BAKK) 145.80p 1.11%
Intu Properties (INTU) 112.10p 1.04%
Vietnam Enterprise Investments (DI) (VEIL) 464.00p 0.87%
Amigo Holdings (AMGO) 268.10p 0.56%
F&C Commercial Property Trust Ltd. (FCPT) 132.80p 0.46%
Crest Nicholson Holdings (CRST) 338.00p 0.30%
FTSE 250 - Fallers
Indivior (INDV) 81.18p -13.32%
Thomas Cook Group (TCG) 30.15p -12.34%
Premier Oil (PMO) 67.00p -10.25%
Kaz Minerals (KAZ) 519.80p -8.23%
Jupiter Fund Management (JUP) 297.10p -6.89%
Bodycote (BOY) 682.00p -6.83%
Rotork (ROR) 236.70p -6.81%
Weir Group (WEIR) 1,340.00p -6.69%
Mediclinic International (MDC) 324.40p -6.35%
Sanne Group (SNN) 556.00p -6.24%