London open: Stocks nudge lower ahead of EU summit, ECB announcement
London stocks nudged lower at the open on Wednesday as investors eyed an EU summit that will decide whether the UK gets another extension to Article 50.
At 0830 BST, the FTSE 100 was down 0.1% at 7,419.67, while the pound was up 0.1% against the dollar and the euro at 1.3066 and 1.1598, respectively.
While Prime Minister May wants a short delay to Brexit until the end of June, it appears that a much longer one of up to a year is on the cards, after European Council President Donald Tusk said a brief delay would create a “rolling series of short extensions and emergency summits, creating new cliff-edge dates”.
It’s understood that December 2019 or next March are likely new departure dates, with EU leaders planning to offer Britain an early exit clause if a deal is ratified in Parliament.
Meanwhile, on home turf, talks between May’s team and Labour have stalled but both sides are due to meet again on Thursday.
CMC Markets analyst Michael Hewson pointed out that a longer extension makes the prospect of a general election much more likely, assuming all other options remain out of reach.
“That includes the prospect of a second referendum, which at the moment there doesn’t appear to be much appetite for, apart from a noisy minority. Furthermore, any second poll may well lack the legitimacy of the 2016 one simply on the basis of turnout if people don’t bother turning up to vote.”
Away from Brexit, investors will also eye the latest policy announcement from the European Central Bank and details on how the new TLTRO loan programme can be expected to work when it starts in September.
In corporate news, Indivior was the biggest loser on the FTSE 250, tumbling nearly 50% after the US Department of Justice charged the company with engaging in a fraudulent marketing scheme to boost prescriptions of its opioid addiction treatment, Suboxone Film.
Consumer goods group Reckitt Benckiser, from which Indivior was spun off in 2014, was also under the cosh, suffering the heaviest losses on the top-flight index.
Shares in Stagecoach fell after the transport operator announced that it has been disqualified from three major rail contract bids, while FTSE 250 retirement homebuilder McCarthy & Stone was also weaker as it reported a 66% drop in first-half profit as it took a hit from restructuring costs.
Rank Group lost ground as it announced that Alan Morgan, the managing director of its retail business, has resigned.
On the upside, Tesco advanced as it reported a 28.8% jump in full-year pre-tax profit and an 11% increase in revenue, and sounded an upbeat note on the outlook.
Homewares retailer Dunelm rallied as it said total like-for-like revenue for the third quarter increased by 12.5%, continuing the growth trend from the first half of the year.
In broker note action, Qinetiq was knocked lower by a downgrade to ‘hold’ from ‘buy’ at Investec, while Glencore was cut to ‘sector perform’ from ‘outperform’ at RBC Capital Markets and Ryanair was downgraded to ‘hold’ from ‘buy’ at Goodbody.