FTSE 100 shares ended down after a Brexit-linked spat between two blue-chip stocks sent their stock lower on Thursday.
The FTSE 100 index ended down 0.7% at 6,977 – dropping below the 7,000 mark – after grocer Tesco (LON:TSCO) said it had stopped selling dozens of consumer products giant Unilever's (LON:ULVR) goods online - including brands such as Marmite and PG Tips.
The row is said to have flared up after Unilever - which says it faces higher costs because of the 17% fall in sterling in the aftermath of the Brexit vote - attempted to increase wholesale prices and pass the burden onto buyers like Tesco.
In what could be a precursor for other food chain-linked deals to collapse if the pound does not recover within weeks, it was a reminder of a less positive outcome for the market of the vote to quit the European Union in June. Another immediate effect of the pound falling was the snapping up of UK tech firm Arm Holdings but Japan’s Softbank in July.
Tesco shares ended down 3% at 195.1p and Unilever down 3.4% at 3596.5p.
Other big decliners were Rio Tinto (LON:RIO), the second-biggest faller of 4.9% to 2576p and BHP Billiton (LON:BLT) off 4.4% to 1184p after broker Citi cut its rating on both of the mining companies to "sell" from "neutral".
There was also better news for housebuilders. Persimmon (LON:PSN) shares rose 1.9% to 1723p and Barratt Developments (LON:BDEV) gained 1.9% to 483.2p after the latest survey from the Royal Institution of Chartered Surveyors suggested demand from house buyers had seen a modest recovery.
Among mid-caps, the FTSE 250 index closed down 0.4% at 17,877, led by Evraz (LON:EVR) down 7.3% to 201.1p. If strong Chinese economic data at the start of October sent the Russian-focused steel maker to a 52-week high, on Thursday an export undershoot by China had the very opposite effect.
The FTSE AIM 100 Index closed down 0.2% at 3965 and the FTSE AIM All-Share Index also down 0.2% to 825.
Overall, gainers in London were a paltry 22% of the bourse while losers totalled 41%.
3.30pm...Biffa off, Misys still on? Marmite war rages.
Wall Street helped exacerbate the woes of London by opening sharply lower following the publication overnight of worryingly slow trade data from China.
The impact was to knock 175 points, or 1% off the Dow Jones Industrial Index, mirroring the reverse seen on the broader-base S&P 500.
In London the mood was similarly grim as FTSE 100 lost 83 points to trade at 6940.30 - a fall of 1.2%.
The downward movement was exacerbated by a number of top-flight stocks going ex-dividend.
Doing the rounds is a rumour that recycling group Biffa is ready to pull its stock market listing, following in the footsteps of Pure Gym and Krispy Kreme.
On a more positive note, the £5bn float of Misys, the banking software specialist, looks likely to go ahead, according to analysts and fund managers.
2.30pm.....going for, going for...gold
A weaker dollar saw gold edge higher on Thursday, while soft trade data from China raised concerns about the state of the world’s second largest economy.
The latter plays to gold’s strength as a safe haven investment in times of economic strife.
The yellow metal managed to claw back some of yesterday’s losses, despite the release of the Federal Open Market Committee meeting minutes from September which suggested that an interest rate hike could come into play before the year end.
"Gold has been under pressure but we do not think the FOMC minutes will add materially to the downwards slant of the market," HSBC analyst James Steel wrote in a note.
The price is notoriously sensitive to rate rises as they increase the opportunity cost of holding the non-yielding bullion, while simultaneously bolstering the dollar which makes the greenback-denominated more expensive to foreign currencies.
1.30pm....the oil market
After a shaky start, Brent crude nudged higher, albeit by a barely perceptible 8 cents a barrel to US$51.89.
Oil prices were down earlier on the only real news in the sector – from the American Petroleum Institute, which logged the first rise in US stockpiles for six weeks.
Sentiment probably won’t turn until there is an OPEC consensus on a production freeze, or even cuts.
Pushback – most notably from Iraq and Venezuela – appears to be an impediment to that outcome.
Brexit, Marmite and miners. Not the most enticing cocktail and one that has apparently left a rather odd after-taste with London’s traders as the FTSE 100 drifted 50 points to 6,973.81.
Uncertainty caused by the UK’s planned retreat from Europe has floored sterling (it went below US$1.22 earlier).
The major miners, meanwhile, led the Footsie losers’ list. The economic travails of China drove Rio Tinto and BHP Billiton lower.
There was also a report out of Oz suggesting the latter may have avoided paying a huge lump of tax (click here).
9.30am...miners on a downer
Miners are dragging the top-share index lower on the back of a 10% fall in Chinese exports in September.
The Footsie’s sojourn above the 7,000 level is already over, with the index down 45 points at 6,979.
Fast moving consumers goods giant Unilever PLC (LON:ULVR) is friendless after its third quarter results were overshadowed by the stand-off with supermarket giant Tesco PLC (LON:TSCO) that has half the population worried about diminishing supplies of Marmite and the other half, presumably, fretting that the stuff is still on sale at all.
“Attentive investors should not be surprised at Unilever’s demand that Tesco pay 10% more for its products following the devaluation of the pound. Results show that faced with currency devaluation in Latin America, Unilever did just that, with prices up 15.5%. Consumers kept buying though, with volumes declining just 5%," noted Nicholas Hyett, an equity analyst at Hargreaves Lansdown.
“Tesco may choose to stand its ground on pricing, but history suggests that if other retailers can stomach the increase, consumers will be willing to stump up to get their Unilever fix,” Hyett suggested.
Be that as it may, Unilever’s shares were not cutting the mustard in early deals, sliding 2.3%, despite underlying sales growth rising 3.2% in the third quarter, ahead of the consensus forecast of 2.9%.
“That Unilever has reported declining volumes is disappointing, though we would note this against a backdrop of weak global volume growth, with management stating that volumes across its markets are flat,” Shore Capital noted.
Pay-TV operator Sky PLC (LON:SKY) saw its share price hold up well in the circumstances, after it boasted of growth across all of its markets in the July-September quarter – the first of its financial year.
The Olympic Games may be over but customers are still signing up, with more than 100,000 new customers joining in the quarter, including Italy's highest first fiscal quarter customer growth in four years.
“We finished the quarter strongly after a slower start against the backdrop of the Rio Olympics and UEFA Euro 2016. It was also a strong quarter of innovation with the launch of our new streaming service, Sky Ticket, in Germany; Ultra HD in the UK, Ireland, Germany and Austria; and our enhanced mobile TV proposition, Sky Go Extra, in Italy, as we transform all our markets to multi-platform distribution services,” said Jeremy Darroch, the group’s chief executive.
The shares edged up a halfpenny to 865.5p despite Shore downgrading the stock to ‘hold’ from ‘buy’ and Liberum sounding less than impressed with this morning’s conference call for analysts.
“Sky’s short conference call did not provide too much in the way of extra detail with the company not giving away too much new and sticking to its explanation that the decision to have SkyQ as the default set top box for customers represents a strategic opportunity; however, we have some questions over the explanations given for the slowdown in Sky’s UK / Ireland customer growth this quarter and our feeling is that subscription revenue growth in the UK has also been weak,” Liberum said, as it reiterated its recommendation to bin the shares.
8.30am...Vertigo and a sell-off of miners
Uncertainty and a seeming bout of vertigo have taken the FTSE 100 below the 7,000 mark after it hit a new record earlier this week.
Weaker than expected Chinese trade data and receding crude prices helped tilt sentiment into negative territory, pushing the index of blue chip shares 53 points lower to 6,970.98 at 8.30am.
That news from the People’s Republic had a direct bearing on London’s major miners, which ebb and flow with the fortunes of the world’s biggest importer of their output.
6.30am...London called lower
London’s FTSE 100 is poised to start Thursday on the back foot, falling back below 7,000.
Record breaking rallies are fading from short term memory as the market is seemingly running out of steam.
Oil prices have backed off – following reports of OPEC production volumes and a build in US inventory – meanwhile expectations of an American interest rate rise are growing.
Over in Asia, Chinese trade data was weaker – exports down around 10%.
“It would appear that rising inflation expectations, along with apprehension about the forthcoming earnings season is starting to gnaw away at sentiment, though markets in Europe aren’t being helped by the febrile atmosphere swirling around Europe as a result of the UK’s summer Brexit vote,” said Michael Hewson, analyst at CMC Markets.
Stocks in New York closed Wednesday a sliver higher, with the Dow Jones ending at 18,144 while the S&P 500 notched up 0.1% to 2,149. The Nasdaq meanwhile finished the session in red, down 0.15% to 5,239.
Japan’s Nikkei dropped 0.38% to 16,775, while Hong Kong’s Hang Seng lost 1.3% to 23,104.
The Shanghai Composite was the exception in Asia, moving ever so slightly into positive territory at 3,060.
Australia’s ASX 200, meanwhile, dropped 0.77% to 5,435.
In London, the FTSE 100 is called to open lower. IG Markets sees the benchmark down nearly 30 points, calling the spread at 6,993 to 6,997 about an hour before the start of trading on the exchange.