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London open: Stocks flat after Wall St losses, as China-US relations sour
London stocks were steady in early trade on Friday, with investors reluctant to make any big bets either way following more losses on Wall Street overnight after the Fed’s disappointing policy announcement earlier in the week, and amid souring relations between the US and China.
At 0830 GMT, the FTSE 100 was flat at 6,713.12, while the pound was up 0.3% against the dollar at 1.2694 and 0.1% firmer versus the euro at 1.1065.
Worries about Sino-US relations weighed on sentiment after the US Justice Department filed charges overnight accusing two members of a Chinese cyber-espionage group of hacking into dozens of US tech and industry giants.
It has been alleged that the two individuals were operating in conjunction with the Chinese government, although this has been denied by Beijing.
“The move is likely to put a strain on US-China relations,” said CMC Markets analyst David Madden.
Meanwhile, rising odds of a US government shutdown also weighed on the mood, as President Trump and congressional Democrats remained at odds over $5bn funding for his border wall with Mexico.
“With several spending bills expiring on Saturday, that leaves today for some last-minute deal making – that is, bickering whether Trump does or does not get his desired Christmas present – to avoid a partial shutdown of government,” Rabobank said.
“However, since many Congressmen have already left Washington for the holidays after the bill passed the Senate last Wednesday, a temporary shutdown over the Christmas break appears all but unavoidable.”
On home turf, the latest GfK survey showed that UK consumer confidence fell to a five-year low in December.
GfK’s long-running consumer confidence index slipped to -14 this month from -13 in November, in line with expectations, with three of the five measures used to calculate the overall scored down, and two up.
Client strategy director Joe Staton said consumers were ending 2018 on a pessimistic note with Christmas cheer in short supply. “We are five points lower than this year’s opening score in January and were no higher than -7 this summer. This represents a more than five-year low for the index which has bumped along in negative territory since 2016.
“In the face of ever-rising costs, and the threat of higher inflation combined with uncertainty around the outcome of the Brexit negotiations, it’s no surprise that consumers are in a chilly mood of despondency and putting on a glum face when they look at the prospects for 2019. Sad to say that an unhappy and uncertain New Year beckons despite good intentions from all points on the economic and political spectrum.”
The measure for the general economic situation of the country in the last 12 months dropped two points to -31 this month, its lowest level since December 2017. Meanwhile, the gauge of expectations for the general economic situation over the next 12 months fell by six points to -38.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the drop in consumers’ confidence to a five-year low provides a very clear signal that the “calamitous” Brexit process will weigh heavily on GDP growth in the fourth quarter.
“Looking ahead, consumers likely will remain despondent until a no-deal Brexit is averted, but the outlook for rising real wage growth, as inflation falls further, and further marginal declines in unemployment suggests that consumers should be more upbeat in six months’ time.”
Miners were the best performers on the FTSE 100, with BHP, Anglo American and Antofagasta all higher as copper prices rose.
Anglo was also in focus as it said it had restarted operations at its Minas-Rio iron ore operation in Brazil after the discovery of two leaks in a slurry pipeline earlier in the year led to a shutdown.
Just Eat was the standout gainer, however, as Takeaway.com agreed to buy larger rival Delivery Hero’s German business in a €930m deal.
On the downside, plastic packaging specialist RPC Group slipped after pushing back the deadline once again for private equity firm Apollo Global Management to make a takeover offer. Apollo had been due to announce a firm intention to make an offer for the company on Friday, but RPC said that the takeovers panel had extended the deadline to 18 January in order for discussions to continue.
Centrica nudged lower after the British Gas owner said it would mount a legal challenge against the upcoming energy price cap, arguing that it has not been fairly calculated.
