LONDON MARKET MIDDAY: Pound Plummets As Jitters Mount Over UK Politics

(Alliance News) - The pound sliding below the USD1.20 mark on Tuesday was unable to prop up the FTSE 100, with trade in London cautious as the nature of the UK's departure from the EU hangs in the balance of the next few days.

The FTSE 100 was 14.81 points, or 0.2%, lower at 7,267.13 at midday. The FTSE 250 was 79.76 points lower, or 0.4%, at 19,401.79, while the AIM All-Share was flat at 873.77.

The Cboe UK 100 index was 0.3% lower at 12,326.47. The Cboe UK 250 was 0.4% lower, at 17,261.92, and the Cboe UK Small Companies was down 0.5% at 10,857.75.

"There's been more selling seen in sterling this morning with the GBP/USD rate dropping below the January 2017 low to trade at levels not seen in 34 years! There's not been a single fresh major catalyst for the declines with the depreciation seen likely an example of the markets getting jittery as MPs return from their summer recess and event risk ramps up markedly," said David Cheetham at XTB.

He continued: "For the time being traders are buckling up for a bumpy ride and any high conviction calls are few and far between given the inherent unpredictability when politics takes a prominent role in moving the markets."

UK Prime Minister Boris Johnson faces a showdown in Parliament after he vowed to push for a snap general election if rebel MPs succeed in a bid to seize control of parliamentary proceedings.

Parliament returns on Tuesday after recess, with MPs looking to take control of Commons business to allow them to discuss proposed legislation to block a no-deal Brexit.

Addressing the nation outside Number 10, the prime minister insisted "I don't want an election, you don't want an election" but moments later a senior Government source said any bid to "wreck" the UK's negotiating position would prompt a motion for an early election.

The source said Johnson would request a general election on October 14 if the move was successful.

The pound was quoted at USD1.1990 at midday, down from USD1.2062 late Monday.

Again, weak UK data was compounded sterling's woes.

The IHS Markit/CIPS UK construction purchasing managers' index reading for August came in at 45.0 in August, down slightly from 45.3 in July. The figure missed the consensus estimate of 45.9, according to FXStreet .

The score was below the 50.0 mark, which separates expansion from contraction, for the fourth consecutive month, Markit added.

Markit said the August data pointed to a "loss of momentum" in the UK construction sector, "led by the sharpest reduction in new work since March 2009".

The construction data came just a day after IHS Markit showed the UK manufacturing sector shrank even more rapidly in August than in July.

"Interestingly, this [the weaker pound] didn’t give the FTSE much of a lift," observed Connor Campbell at Spreadex.

"The UK index is sitting a smidge away from 7,300, a level it abandoned around a month ago; however, it might be feeling a bit uneasy itself given how precarious the political situation is right now," he said.

Turning to the eurozone, Campbell commented that the CAC and DAX were "perhaps put off by the euro’s gains against the pound, alongside the confirmation of fresh tariffs on Chinese goods by the US."

In mainland Europe Tuesday midday, the CAC 40 in Paris and the DAX 30 in Frankfurt were both 0.4% lower.

To come in Tuesday's economic calendar, there is a Markit manufacturing PMI for the US at 1445 BST.

In the US, Wall Street is set to open from Monday's holiday on a downbeat note, with the Dow Jones and S&P 500 pointed down 0.8% and the Nasdaq down 1.0%.

In London, Ferguson shares were up 3.0% after the plumbing and heating products firm said it intends demerge its UK operations and will evaluate a new listing structure for its businesses.

Wolseley UK will become an independently-listed company solely serving the UK market and Ferguson will be wholly focused on North America, the company explained.

The FTSE 100-listed company, which has previously mulled a US-listing, said it will consider the "most appropriate listing structure" for its businesses.

Meanwhile, John Martin is slated to step down as chief executive of the company on November 19 and will be replaced by Kevin Murphy. Murphy joined Ferguson's board in 2017 when he was appointed as the chief of the company's US operations.

Packaging firm DS Smith slipped 2.3% as it reported a solid first quarter in the face of macro-economic volatility.

DS Smith said business has continued to progress well in the first quarter to the end of July, driven by new wins in Europe and the US, as well as ongoing operating cost efficiencies and a focus on generating cash flow. These actions have bolstered DS Smith's confidence in its business, it said, despite ongoing subdued volumes in some markets, particularly areas with significant export-led market exposure, such as Germany.

In the FTSE 250, Restaurant Group slumped 12% after sinking to an interim loss.

In the 26 weeks to June 30, the restaurant chain operator recorded a sharp swing to a pretax loss of GBP87.7 million from a GBP12.2 million profit a year before.

Restaurant Group recorded GBP115.7 million in exceptional costs in the first half, compared to just GBP8.4 million a year before. In the first half, the company recognised GBP100 million in impairments in its Leisure unit, after closing 16 sites that were "structurally unattractive".

Revenue jumped 58% year on year to GBP515.9 million from GBP323.1 million, reflecting the addition of pan-Asian dining chain Wagamama. Like-for-like sales were up 4.0%.

Low-cost airline easyJet was 4.0% lower after Kepler Cheuvreux cut the stock to Reduce from Hold.

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