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London open: Stocks edge lower as China-US trade talks eyed
London stocks edged lower in early trade on Monday, with investors erring on the side of caution ahead of this week’s trade talks between the US and China.
At 0830 BST, the FTSE 100 was 0.3% weaker at 7,136.89, while the pound was down 0.2% against the dollar and the euro at 1.2310 and 1.1214, respectively.
Investors were mulling a report over the weekend suggesting that Chinese officials are increasingly reluctant to agree to a broad trade deal pursued by US President Donald Trump.
According to Bloomberg, Chinese officials have significantly narrowed the scope of topics they are willing to discuss at the trade talks in Washington on Thursday. Vice Premier Liu He, the leader of China’s trade delegation, was said to have recently told dignitaries that China will not commit to reforming industrial policies or government subsidies.
Fritz Louw, currency analyst at MUFG Bank, said: “These issues are key red lines for the US and reticence on the Chinese side to negotiate on these topics makes a trade deal less likely anytime soon.”
The release of more disappointing data out of Germany also dented the mood, as German factory orders fell more than expected in August, with domestic orders proving to be the biggest drag.
According to Destatis, orders declined 0.6% on the month in August, which was an improvement on the revised 2.1% drop seen the month before but steeper than the 0.3% dip expected.
On the year, factory orders slumped 6.7% compared to a downwardly revised 5% decline in August and expectations of a 6.4% fall.
On home shores, Brexit was firmly in focus as always after French president Emmanuel Macron said the EU will decide at the end of the week whether a deal is possible.
Neil Wilson, chief market analyst at Markets.com, said: “Brexit will dominate the agenda this week as the UK government tries to get the EU to look at its homework. So far Brussels is not prepared to even look at the proposals, let alone grade it.
“Boris Johnson has his work cut out if he’s to pass this test. Still seems odds-on to take Britain out of the EU on October 31 whatever deal is on the table, however there are a lot of rumours and noise about what Parliament will do to prevent a no-deal exit at any cost. MPs seem prepared to completely crash the constitution to block Boris.”
In corporate news, shares in SIG tumbled after the building materials supplier warned on profits, citing deteriorating markets caused by Brexit worries and a weaker German economy. The company said it now anticipated “significantly lower” full-year underlying profits in both its specialist distribution and roofing merchanting businesses.
In separate announcements, it also announced the sale of its air handling division and building solutions business for a combined £235.8m, which would “significantly strengthen” its balance sheet.
Wilson said: “Things look pretty bad as it’s having to flog a couple of its businesses to steady the ship.”
Shares of peer Travis Perkins also fell sharply.
