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London open: Stocks drop as impeachment, Brexit concerns weigh
London stocks fell in early trade on Wednesday, taking their cue from downbeat sessions in the US and Asia as investors mulled political developments in the UK and US.
At 0830 BST, the FTSE 100 was 0.5% weaker at 7,258.50, while the pound was down 0.3% against the dollar at 1.2455 and 0.1% lower versus the euro at 1.1329.
Sentiment took a hit as it emerged that US President Donald Trump was facing impeachment proceedings. Overnight, Democratic House speaker Nancy Pelosi formally initiated proceedings against Trump, accusing him of betraying his oath of office and national security.
The move follows a call during which Trump allegedly pressured Ukrainian President Volodymyr Zelensky to investigate the family of former Vice President Joe Biden. Trump has admitted to bringing up Biden on the call but denies pressuring Zelensky.
Neil Wilson, chief market analyst at Markets.com, said: “While there have been calls to impeach the president since pretty much his first day in office, this looks decidedly more serious. The Democrats think they’ve got him on charges he enlisted a foreign power to support his re-election.
“Markets won’t like the uncertainty it brings. In previous instances (Nixon, Clinton) there has been rockiness for equities and the dollar. Mr Trump says he’ll release transcripts of a call to show his innocence today. We shall see – fundamentally you can’t see this succeeding as the Republican Senate won’t touch Trump. If anything it’ll serve Trump’s cause well. Markets may not like it but ultimately it seems to have a very low chance of success. Probably a storm in a tea cup.”
Geopolitical concerns were also a factor on Wednesday after Trump hit out at Iran and China in his speech at the United Nations a day earlier.
On home shores, parliament will reconvene on Wednesday following the Supreme Court ruling.
“While the Supreme Court ruling may well have unlocked extra parliamentary time for MPs to debate Brexit, it is not immediately clear what it will be able to achieve,” said CMC Markets analyst Michael Hewson.
“It is more likely that this time will be wasted with political chicanery instead of striving to break the impasse. We can expect politicians from all sides to be highly critical of the Prime Minister, as well as calling for him to resign, however these calls are likely to fall on deaf ears.”
In equity markets, travel company TUI was the worst performer on the FTSE 100 after two days of strong gains on the back of Thomas Cook’s collapse and following the release of a pre-close trading update.
Imperial Leather maker PZ Cussons was on the back as it said full-year results are expected to be in line with the previous year – assuming no further deterioration in its key markets – amid “challenging” conditions. In a statement ahead of its annual meeting, the company said its key markets continue to be hit by consumer fragility, with the Nigerian economy remaining depressed, uncertainty in the UK and “highly competitive” markets in Australia.
On the upside, supermarket group Sainsbury’s was in the green as it said first-half pre-tax profits would fall by £50m due to the impact of unseasonal weather and higher marketing costs, but maintained its full year outlook.
Second quarter total retail sales rose 0.1% excluding fuel, with like-for-like sales down 0.2%, excluding fuel. Grocery sales increased by 0.6%, general merchandise declined 2% and clothing increased by 3.3%.
Babcock rallied as the aerospace and defence group said trading was in line in the first half and that it continued to win work across all sectors, as it backed its full-year guidance.
United Utilities also gained ground after saying it expects first-half revenue and underlying operating profit to rise, but that net debt will also increase due in part to a repayment to its pension scheme.
In broker note action, BBA Aviation was downgraded to ‘hold’ at Berenberg, while Entertainment One was cut to ‘neutral’ at Citi.
