London midday: FTSE edges into the red; think tank downgrades UK growth forecast

London stocks had edged into the red by midday on Monday, unable to capitalise on Wall Street's record close at the end of last week as investors mulled a downgrade to UK growth forecasts and eyed more Brexit talks and the resumption of trade discussions between the US and China.

The FTSE 100 was down 0.2% at 7,414.91, while the pound was up 0.1% against the dollar at 1.2922 and flat versus the euro at 1.1585 as Brexit talks between the government and the Labour Party were due to resume on Monday.

IG market analyst Chris Beauchamp said: "The UK government faces a tough week as local elections take place. Both the Conservatives and Labour will view these as a test of sentiment ahead of European elections later in the month, and thus there will be little incentive to make progress in the never-ending cross-party Brexit talks.

"Cable continues to rally off last week’s lows but the market is clearly fretting about the lack of progress, given the drop in GBPUSD over the past six weeks."

Investors were digesting the latest report from the EY Item Club, which cut its UK growth forecast for this year to 1.3% from a previous estimate of 1.5% growth, while its forecast for growth in 2020 was cut to 1.5% from 1.7%. EY said the downward revision for this year primarily reflects prolonged Brexit uncertainty following the decision to delay the UK’s exit from the EU to a flexible 31 October deadline.

Adding to the downbeat tone, data released by the European Commission showed economic sentiment in the UK deteriorated in April. The EC's economic sentiment indicator for the UK slipped to 99.3 this month from 100.8 in March.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The decision to delay the UK's departure from the European Union by six months has done little to revive confidence among business or consumers."

More broadly, relations between the US and China were in focus after US Treasury Secretary Steve Mnuchin said discussions between the two were entering a critical point as an American delegation heads to Beijing this week to finalise a deal.

As well as trade relations and Brexit talks, market participants were looking ahead to the Bank of England rate announcement on Thursday.

In equity markets, Ocado was the worst performer on the FTSE 100 as it emerged that the fire that destroyed its warehouse this year was sparked by an electrical fault which caused a robot to catch fire.

Tesco nudged lower as it said IFRS16, the new financial accounting reporting standard on accounting for leases, for its 2019/20 financial year, increased group operating profit and margin, but reduced pre-tax profit and diluted earnings per share.

Steelmaker and miner Evraz retreated even as it first-quarter consolidated crude steel output climbed by 12.4% quarter on quarter to 3.5m tonnes.

Auto Trader fell as it appointed chief operating officer Nathan Coe as chief executive-designate after current boss Trevor Mather announced his intention to retire in 2020, while Homeserve was hit by a downgrade to 'reduce' from 'hold' at HSBC.

On the upside, shares in advertising giant WPP rose following an upgrade to 'overweight' from 'equalweight' at Barclays, which pointed to the stock's valuation, the Kantar disposal and "some confidence" in management's strategy to turn the business around. In addition, both Deutsche Bank and Credit Suisse hiked their price targets on the stock.

British Airways and Iberia parent IAG was also given a leg up by an upgrade, as UBS bumped the stock up to 'buy' from 'neutral'.

Ferrexpo was a high riser following heavy losses at the end of last week, as it rejected Deloitte's assertion that it delayed a review into donations to the Blooming Land charity in Ukraine in the latest exchange between the company and its former auditor over the affair.

AstraZeneca rose as it said the EU's medicines regulator has recommended that the use of its ovarian cancer drug Lynparza be expanded.

Doorstep lender Provident Financial was in the green as Non-Standard Finance extended the deadline for its £1.3bn hostile offer to 15 May and urged the company's shareholders to accept it.

Market Movers

FTSE 100 (UKX) 7,414.91 -0.18%
FTSE 250 (MCX) 19,880.90 0.12%
techMARK (TASX) 3,608.71 0.16%

FTSE 100 - Risers

NMC Health (NMC) 2,835.00p 3.17%
TUI AG Reg Shs (DI) (TUI) 858.80p 1.73%
WPP (WPP) 970.40p 1.61%
Barclays (BARC) 163.48p 1.52%
easyJet (EZJ) 1,171.00p 1.47%
International Consolidated Airlines Group SA (CDI) (IAG) 542.80p 1.38%
Paddy Power Betfair (PPB) 6,536.00p 0.99%
Aviva (AV.) 428.30p 0.90%
Glencore (GLEN) 313.60p 0.88%
AstraZeneca (AZN) 5,844.50p 0.85%

FTSE 100 - Fallers

Ocado Group (OCDO) 1,331.50p -4.76%
Croda International (CRDA) 5,145.00p -2.48%
Direct Line Insurance Group (DLG) 332.40p -1.66%
United Utilities Group (UU.) 833.60p -1.58%
Whitbread (WTB) 4,784.00p -1.40%
Coca-Cola HBC AG (CDI) (CCH) 2,720.00p -1.31%
Pearson (PSON) 847.80p -1.26%
Next (NXT) 5,796.00p -1.19%
Informa (INF) 779.20p -1.19%
Evraz (EVR) 632.40p -1.19%

FTSE 250 - Risers

Ferrexpo (FXPO) 206.50p 7.22%
Kier Group (KIE) 372.80p 5.31%
Funding Circle Holdings (FCH) 256.00p 4.07%
Spirent Communications (SPT) 156.80p 3.70%
William Hill (WMH) 164.64p 2.48%
IntegraFin Holding (IHP) 394.85p 2.24%
CYBG (CYBG) 209.35p 2.22%
Bakkavor Group (BAKK) 129.56p 2.18%
Saga (SAGA) 60.00p 2.13%
Aston Martin Lagonda Global Holdings (AML) 1,010.00p 2.10%

FTSE 250 - Fallers

Homeserve (HSV) 1,087.00p -3.89%
Computacenter (CCC) 1,231.00p -3.45%
Acacia Mining (ACA) 145.20p -1.96%
IWG (IWG) 338.70p -1.88%
Petrofac Ltd. (PFC) 448.92p -1.81%
Pets at Home Group (PETS) 147.00p -1.67%
Indivior (INDV) 39.97p -1.48%
Clarkson (CKN) 2,530.00p -1.36%
Domino's Pizza Group (DOM) 265.90p -1.34%
Apax Global Alpha Limited (APAX) 149.98p -1.33%