London’s FTSE 100 closed down on Wednesday in a repeat of the previous session’s gyrations over the ongoing Brexit vote shock.
The fall in UK and European stocks picked up a gear, with banking shares leading the slide as Deutsche Bank plumbed fresh record lows.
The announcement by the Bank of England that it was loosening lending criteria, stimulating more liquidity and hinting on a mid-year rate cut to a fresh 300-year low on Tuesday all guaranteed a rough session ahead for banking stocks.
Sterling hit a fresh 31-year low of $1.28 on Wednesday and some analysts predict it will make history by reaching parity with the US currency at the end of this year or early in 2017.
The blue-chip ticker ended down 1.25% at 6,463 on Wednesday, having made early gains, before spending the session after 1000 BST in negative territory and sliding as the day’s fatigue wore out optimists.
So far in July, the top-100 stocks have traded a range of 6,400 to 6,600 – enough volatility caused by the hope that the blue-chip stocks have sufficient non-UK and non-EU business to see them through what is proving to be an increasingly desperate market scenario following the UK’s surprise vote to quit the European Union.
On the more optimistic side, the FTSE100 has traded a higher range in the third quarter than the 6,100 to 6,400 range seen since mid-April and into the June 23 referendum run-up. In fact, looking more broadly, the spike on July 1 in London achieved the highest levels for the FTSE100 since August 2015 when debate about the looking referendum began.
For all the underperformance of the past week, London’s mid-caps did relatively well on Wednesday, declining only 0.4% to 15,669.
But it was more sore news for the smallest listed companies on the Alternative AIM market. The biggest 100 stocks in this segment, the FTSE AIM 100 Index, came off 1.1% to 3,308, while the FTSE AIM All-Share Index was off 1.2% at 697.
Only 22% of London’s stocks gained on Wednesday, with 44% falling and 34% unchanged.
The top gainer was Melrose Industries PLC (LON:MRO), up 45.8% to 597.5p. No mean feat, given as its main news of the day was a proposed takeover of US-based Nortek Inc (NASDAQ:NTK). Or rather, perhaps because it is a US company this cheered on UK-centric investors. Either way, the US stock gained 39.25% to $87.02.
The acquisition of Nortek, Inc. and fully underwritten Rights Issue plans to raise gross proceeds of approximately GBP1.655bn.
The acquisition will be implemented principally by way of a cash tender offer to Nortek shareholders by Nevada Corp. ("MergerCo"), a wholly owned subsidiary of Melrose, followed by a merger of Nevada Corp. with Nortek. The offer price of $86 per Nortek Share, net, in cash and without interest, values the issued and outstanding shares of Nortek at $1.436bn (£1.101bn).
Meanwhile, the biggest faller in London was Vislink PLC (LON:VLK). The stock lost 55% to 14.75p after Vislink said full-year results in 2016 will be materially below previous estimates owing to a lower-than-expected trading performance.
Midsession
Top-flight shares tumbled into the red on Wednesday as the pound plummeted amid economic fears sparked by the EU referendum.
The FTSE 100 Index reversed modest gains to stand 103.29 points adrift at 6442.08 as sterling hit a new 31-year low against the dollar at 1.28 overnight.
The weakest ever GBP/USD rate was US$1.05 in 1981 and online bookmaker Betway quoted 7/2 for the pound to lurk in the region of US$1-1.09 once again.
Betway’s Alan Alger said: “The way sterling is moving at the moment, the dollar overtaking the pound isn’t entirely out of the question at 33/1.”
The FTSE 250 Index, which contains a relatively high number of UK-focused companies, also nosedived 182.14 points to 15,552.54, reportedly losing £31.6bn since the day before the fateful vote.
Meanwhile, fund manager Henderson was being rumoured as the fourth potential City institution to halt property fund redemptions following similar moves by M&G, Aviva PLC (LON:AV.) and Standard Life PLC (LON:SL.).
Connor Campbell at Spreadex said: “The pound has seen yesterday’s horror-show trading continue into this morning’s European session, sparking another round of losses for the property sector.”
And property stocks were indeed on dodgy foundations, with Barratt Developments PLC (LON:BDEV) and Taylor Wimpey PLC (LON:TW.) falling 5.2% to 332.1p and 4.4% to 116p respectively.
Joining them at the bottom of the pile were supermarkets Tesco PLC (LON:TSCO) and W Morrison Supermarkets PLC (LON:MRW) amid concerns about falling food prices, which dropped 0.8% last month.
Tesco fell 9.6% to 158.95p and Morrisons was 6.9% down at 172.9p.
But precious metal miners and defensive stocks were gleaming as gold prices rose for the fifth day in a row.
Fresnillo (LON:FRES) and Randgold Resources PLC (LON:RRS) were the among the biggest winners this morning, rising 6.3% to 2013p and 3.3% to 9620p respectively.
Small-cap indices were off, with the FTSE AIM All-Share down 8.4 points at 696.79 and the FTSE AIM 100 retreating 43.4 to 3303.36.
Kolar Gold Limited (LON:KGLD) twinkled by 29.2% to 1.55p as the Indian-focused miner on news of a US$2.4mln funding injection for extra drilling within its Geomysore Mining Services arm.
Industrial investor Melrose Industries PLC (LON:MRO) lifted 34% to 550.5p as it agreed to buy heating and air conditioning maker Nortek and launched a £1.65bn rights issue.
Scancell Holdings Plc (LON:SCLP) also got an 8.3% boost to 16.25p as the cancer drug developer unveiled upbeat data from its SCIB1 Phase 1/2 clinical trial in malignant melanoma.
But video technology business Vislink PLC (LON:VLK) lost more than half its value to 15.25p as it warned on annual profits after slower order intake in the second quarter.
And electronic security systems provider Newmark Security PLC (LON:NWT) backtracked 35.7% to 1.8p after it blamed tougher trading for its own full-year profit warning.
Nyota Minerals (LON:NYO) also lost ground, down 32% at 0.04p, after it decided to sell its £25,000 stake in Kefi Minerals PLC (LON:KEFI). Kefi’s shares fell 0.8% to 0.51p.