FTSE 100 closed 1.26% lower as the political turmoil in Europe weighed on markets.
The UK's blue-chip index closed over 97 points lower at 7,632, while the FTSE 250 shed over 363 points to 20,746.
In the current markets, the pound fell 0.49% against the US dollar at 1.1472.
"Political turmoil in Europe weighed on investor sentiment, pulling stocks lower across the board, whilst also dragging the euro sub $1.16, striking fresh year to date lows," said Fiona Cincotta, Senior market analyst at CMC Markets.
She added: "This political drama has reawakened fears over eurozone stability and default risk which have been dormant for several years.
"Italian 10-year bond yields jumped 3.38% to its highest level since March 2014, whilst he spread over the German bond widening to 2.5% highlights the extent of the fears."
Predictably, when markets get nervous, commodity stocks gain, and leading the Footsie was silver giant Fresnillo (LON: FRES), which surged 3.12% to 1,338p, while Evraz (LON: EVR) added 1.32% to 484.70p.
Top loser on Footsie was NMC Health (LON:NMC), which lost 4.77% to 3,630p.
4pm: Footsie down 79 points
Heading into the final half-hour of trading, the FTSE 100 was down 79 at 7,651.
NMC Health plc (LON:NMC) was the worst performer, shedding 164p at 3,648p while utilities such as Severn Trent PLC (LON:SVT), down 4.1%, and Scottish & Southern Energy PLC (LON:SSE), down 3.5%, were also out of favour.
3.30pm: Another day, another Italian government?
US markets opened sharply lower, taking their lead from European markets.
The Dow Jones average was down 156 at 24,597 while the S&P 500 was down 14 at 2,707 in the first hour of trading. Meanwhile, in the UK, the FTSE 100 was doing its best incy-wincy spider impression, recovering to 7,643, down 88 points on the day.
“We are seeing a European-wide sell-off and financials, in particular, have been under pressure on concerns that the next Italian election could turn into a referendum on membership of the euro. Even a weaker euro and pound have failed to provide some price stability, as is often the case, and the consensus appears to be that Cottarelli will struggle to gather support to pass a budget, resulting in snap-elections when both anti-establishment parties could return with a larger representation in parliament,” said Chris Payne, the managing director at GWM Investment Management.
London Markets: FTSE 100 faces worst day in 2 months, engulfed by European political fears https://t.co/1RJ17IiImI pic.twitter.com/WcUCqfCR3v
— Costello, King & Asc (@CostelloKingAc) May 29, 2018
Marks and Spencer Group Plc (LON:MKS) was one of the worst blue-chip performers, sliding 11p to just under three quid as it faces the prospect of relegation from the top-share index.
Groceries delivery firm Ocado PLC (LON:OCDO), down 1.5% at 873p today, is in the box-seat to take the retailer’s place in the FTSE 100.
READ Morgan Stanley cuts Ocado rating after strong gains following Kroger international partnership deal
1.15pm: Footsie's tentative recovery falters as US stocks look set to open lower
The Footsie’s recovery, tentative as it was, has faltered ahead of an opening on Wall Street that is expected to be something of a bloodbath.
The FTSE 100 was down 99 points at 7,632.
In the US, the Dow Jones average was expected to open at around 24,562, down from 24,753 at last night’s close. The S&P 500, which yesterday shed 6 points to close at 2,721, was expected to open its account at 2,701.
Sentiment has not been helped by the views expressed in Paris today by billionaire trader George Soros, the man largely responsible for the British government abandoning attempts to have sterling enter the European exchange rate mechanism.
Soros said the world may be heading for another global crisis.
“Europe needs to do something drastic to escape it. It needs to reinvent itself,” Soros said in a speech to the European Council on Foreign Relations.
"Everything Has Gone Wrong": Soros Warns "Major" Financial Crisis Is Coming https://t.co/9jramlPu5L
— zerohedge (@zerohedge) May 29, 2018
As Soros predicts another global economic collapse, RBS has yet to recover from the last one but Berenberg has reiterated its ‘buy’ recommendation on the state-owned lender and increased its price target from 300p to 330p ahead of the bank’s annual general meeting tomorrow.
“During the last year, RBS has settled £13bn of legacy issues, Berenberg believes its recent settlement with the US DoJ marks the end of this period. Moreover, RBS has continued to build capital during the resolution of these issues,” Berenberg argues.
The bank reckons RBS is not only ready to pay out 40% of retained earnings as dividends but it will also supplement this with special dividends. It is forecasting dividends of 15p for 2018 and 25p for next year.
READ: Royal Bank of Scotland in the spotlight on Wednesday as possible dividend return eyed
“RBS has £5bn of excess capital, or c40p per share, after dividends. Berenberg believes this can support material share buybacks, of up to 15% of today’s market value, as a result, Berenberg is sanguine about potential headwinds from government sales,” it said.
Berenberg may be sanguine about the government selling down its stake (and forgoing some dividend income) but the market was not, and the stock remained the worst performer in lunchtime trading, shedding 3.8% at 278.8p.
12.30pm: Footsie in agonisingly slow recovery
After hitting a low at around 10.00am, the FTSE 100 has been climbing like a hamstrung hippo going up a one-in-four hill.
The FTSE 100 was down 92 at 7,638, some 28 points above its low point for the day.
Royal Bank of Scotland was the worst performing blue-chip ahead of tomorrow’s annual general meeting.
“The UK government is looking into selling a relatively small stake in the Royal Bank of Scotland but a stake that could be worth several million pounds,” commented Finoa Cincotta, a Senior market analyst at City Index.
“The Scottish lender is mainly government owned with a 70% stake being held by the state and could see about 10% being sold later this year. Banking stocks did not take the news too well and both RBS and Barclays responded with declining prices,” she observed.
RBS was off 9.5p at 280.25p and Barclays PLC (LON:BARC) was down 6.56p at 199.64p.
Stock market darling Fevertree Drinks PLC (LON:FEVR) was in the red despite an upgrade from Morgan Stanley.
The shares took a knock on May 17 when the mixer drinks maker failed for the first time since its flotation to upgrade expectations in a trading update but have since more than made good those losses, rising to 3,039p at Friday’s close.
The shares shed 39p this morning, 150p below Morgan Stanley’s price target, which has been raised to 3,150p from 3,100p.
“The US is the next leg of the equity thesis,” Morgan Stanley maintained.
“The US is currently 18% of Fever-Tree sales, but we expect it to contribute ~50% of group revenue growth betweenFY17-22. Based on our estimates, the US premium mixers market is currently~0.5x the size of the UK's, while the premium spirits market is ~9x bigger. We expect this gap to close, driving category growth,” the US bank said.
*Morgan Stanley RAISES FEVERTREE TARGET TO 3150 (3100) PENCE - 'OVERWEIGHT' - heavy dir buying in recent weeks too.
— Cockney Rebel (@RebelHQ) May 29, 2018
11.00am: Defensive stocks among the few blue-chip gainers as the Footsie suffers triple-digit fall
The FTSE 100 was sporting a triple digit fall in late morning trading with just five blue-chips in positive territory.
Two of those five – Fresnillo PLC (LON:FRES) and Randgold Resources PLC (LON:RRS) – are precious metals producers, reflecting traders’ risk-averse attitude as the FTSE 100 tumbled 100 points to 7,630.
“The fear of another election and political uncertainty in Italy is driving significant losses throughout Europe today, and the prospect of a meeting between Trump and Kim Jong-Un has done little to appease markets,” noted Joshua Mahony at spread betting firm, IG.
Among the mid-caps, Dixons Carphone Plc (LON:DC.) was proving about as popular as one of the extended warranties the company likes to proffer to its customers as it warned on profits.
“Often when a new chief executive joins a company, particularly if has faced operational challenges or is in a difficult sector, he will look to rebase expectations,” said Russ Mould, the investment director at wealth management outfit, AJ Bell.
“Eight weeks into his tenure at electronics retailer Dixons Carphone, chief executive Alex Baldock has followed this play-book to the letter.
“In what can be described as a kitchen sinking exercise, the company is guiding for a significant drop in profit in the current financial year and reveals plans to shutter 92 Carphone Warehouse stores.
“The mobile phone part of the business has suffered thanks to rising competition, increases in handset prices and changing customer habits with consumers holding on to their phones for longer,” Mould explained.
“Investors may forgive Baldock the pain caused by this shock profit warning if he can back up his assertion that the problems the company faces are ‘fixable’; however, he needs to get it right as there is unlikely to be a second opportunity to ground expectations in this way,” Mould suggested.
Dixons carphone chairman in Jan praises “outstanding contribution”by outgoing CEO Seb James - saying company in "much better position" than when he arrived. New CEO today under same chairman Ian Livingstone - "there's a lot to fix". Shares down 23%.
— Simon Jack (@BBCSimonJack) May 29, 2018
Down among the third-liners, Prairie Mining Limited (LON:PDZ) lost more than a fifth of its value after it revealed that the Ministry of Environment in Poland had rejected the company’s application to amend the 50-year mining concession for the Debiensko hard coking coal mine.
The company wants to extend the deadline for the first production of coal from the mine to 2025 from the current date of 2018. Prairie said it will appeal against the decision.
10.00am: RBS leads the FTSE 100 lower after rumours that sell-down of government's stake is imminent
You would have thought traders would have become inured to political ructions in Italy by now but apparently not.
Italian president Sergio Mattarella rejected the candidacy of eurosceptic Paolo Savona for the role of finance minister over the weekend, sparking a shake-out in the Italian stock market yesterday.
After the bank holiday weekend, the FTSE 100 got a chance to join in the wave of selling and was down 86 points at 7,544.
READ: RBS lower on reports part of the UK taxpayers' stake could be sold as early as this week
State-owned lender Royal Bank of Scotland Group PLC (LON:RBS) led the retreat, shedding 4.3% at 277.3p, on reports that the long-awaited sell-down of the government’s 70.5% stake.
Repeat a rumour often enough and it is likely to come true one day and so it might prove with Smiths Group PLC (LON:SMIN), the diversified technology group that has been a merger candidate for longer than most people can remember.
The shares shot up 46p to 1,766p after the company responded to press speculation to confirm it is in very early stage discussions about a potential combination of its medical division with ICU Medical Inc. (NASDAQ: ICUI).
New post: "Smiths Group up as it confirms “very early stage discussions” about potential merger of medical divi" https://t.co/4L76f6E0nW
— BestUSTraders (@bestUStraders) May 29, 2018
8.45: Delayed Italian hangover and some Spanish trouble brewing
The reverberations from the euro-sceptic tinged Italian elections had a delayed impact on the FTSE 100 as traders returned to their work stations after the long weekend.
The index of blue-chip shares shed 59 points in the first half-hour of trade to sit at 7,671.08.
To add to the political maelstrom in mainland Europe, Spain's president, Mariano Rajoy, could face a no-confidence vote as early as Friday.
Leading the fallers was Marks & Spencer (LON:MKS) as analysts began to rework their numbers in the wake of last week's update and investors prepared for the retailer's plunge through the trap-door into the FTSE 250.
Possibly replacing Marks in the top-flight could be grocery delivery giant Ocado (LON:OCDO), whose shares have almost doubled in the past year.
However, they were down 2.6% early on after heavyweight Morgan Stanley downgraded the stock to 'equal weight'.
Among the tiddlers, ImmuPharma (LON:IMM) was given a 12% boost after researchers took a deeper dive into the data generated from a phase III study of its flagship drug Lupuzor.
Other Proactive news headlines:
Advanced Oncotherapy PLC (LON:AVO) has found a way to more accurately measure the energy of each proton pulse used in its proton therapy system. The company said its newly-developed time-of-flight (TOF) testing of beam energy control and adjustment has proved to be successful with real-time results demonstrating remarkably good agreement with computer simulations.
Mosman Oil And Gas Limited (LON:MSMN) has raised £600,000 of additional capital through a share placing with the new funds. It is issuing 109mln new shares at a price of 0.55p each. The company told investors that it is now focusing on maximising the delivery of short and medium-term benefits from its projects.
Amryt Pharma PLC (LON:AYP) has signed four further distribution agreements for Lojuxta, its treatment for homozygous familial hypercholesterolaemia, across the Middle East.
Diagnostics group Akers Biosciences Inc (NASDAQ:AKER, LON:AKR) said it will re-evaluate its options for its rapid chlamydia test after it decided to withdraw its regulatory application for the product at the recommendation of the US Food & Drug Administration.
SkinBioTherapeutics PLC (LON:SBTX) said it will fulfil the industrial partner role in a skin health research grant awarded by the Biotechnology and Biological Sciences Research Council (BBSRC) to the University of Manchester.
A boardroom battle has broken out at Southend Airport owner Stobart Group Ltd (LON:STOB). Former chief executive Andrew Tinkler has indicated he will vote against the re-appointment of chairman Iain Ferguson at June’s AGM.
Allergy Therapeutics plc (LON:AGY) said that house-dust immunotherapy has shown to be well-tolerated and demonstrates highly significant symptom improvement. The AIM-listed biotechnology company that the total of 141 patients were evaluated and they demonstrated a 43% decrease in combined symptom medication score compared with baseline after one year.
Belvoir Lettings PLC (LON:BLV) said that trading during the first four months of the current financial year has continued well and is in line with its expectations. In a trading update ahead of its annual general meeting on Tuesday, the UK’s largest property franchise said revenue increased from its three key income streams of residential lettings, property sales and financial services.
United Oil & Gas Plc (LON:UOG) updated investors as the 20% owned Podere Maiar 1 well, in the Podere Gallina licence, is advancing towards production. The Podere Maiar discovery was announced in January, following positive well results, and, United today confirms that a development plan has now been submitted to the Italian authorities.
Range Resources Ltd (LON:RRL) has started operations at its Perlak field in Northern Sumatra, Indonesia. Re-opening work on the first well, POG-D, has already started and is expected to be completed by the end of this month.
Ironridge Resources Ltd (LON:IRR) has intersected significant pegmatite at its Ewoyaa project in Ghana. Indications are at this stage that the rock contains two types of lithium-bearing mineralisation, although core isn't due back from assay labs for about two months. However, IronRidge has already identified lithium in trenching work, and chief geologist Len Kolff is "eagerly awaiting results."
Bezant Resources plc (LON:BZT) has renewed its Mankayan copper-gold license in the Philippines. The license is now good until April 2020, and the company now plans to undertake technical and community engagement programmes there.
Metminco Limited (LON:MNC) (ASX:MNC) announced that Andrew Metcalfe will be joining the company as its CFO and joint company secretary effective from 28 May 2018. The group said Metcalfe provides CFO and company secretarial services and advises on corporate governance matters for a number of ASX listed, public and private companies and not for profit organisations.
ClearStar Inc (LON:CLSU), the technology and service provider to the background check industry, said non-executive director André Schnabl purchased 15,000 ordinary in the company on 25 May a price of 58p each. Following the purchase, Schnabl holds 97,000 ordinary shares, representing approximately 0.3% of the company’s issued share capital.
Westminster Group PLC (LON:WSG), a leading supplier of managed services and technology-based security solutions worldwide, has announced the appointment of Patsy Baker as a non-executive director from 1 June 2018. The firm said Baker has considerable public relations and marketing experience, having spent over 20 years as the Group Business Development Director with Bell Pottinger. In November 2017 she joined Huntsworth PLC as Senior Group Advisor.
6.45am: Weak start predicted
The FTSE 100 is seen falling back on Tuesday, returning from the bank holiday weekend in cautious fashion reflecting weaker showings by global markets amid Italian election uncertainties and following pre-weekend falls on Wall Street, with most eyes on this Friday’s always important US non-farm payrolls report.
Spread betting firm IG expects the UK blue-chip index to open around 35 points lower at 7,695, having closed13.54 points higher last Friday
Like London, US markets were also closed on Monday for a bank holiday, but on Friday the Dow Jones industrial average closed around 58 points lower at 24,753, unsettled again by uncertainty over President Trump’s denuclearisation summit with North Korea and China trade tariff talks.
Meanwhile European shares dropped yesterday after the anti-establishment 5-Star and League parties in Italy abandoned plans to form a government, and Asian shares fell on Tuesday as early elections loomed in Italy, although a revival in diplomatic talks with North Korea and a retreat in oil prices from recent highs supported sentiment.
On currency markets, the pound was fairly flat versus both the dollar and the euro overnight with little UK economic data due all this week, although traders will pay some attention to the latest Nationwide house price index due this morning.
It is also expected to be a relatively quiet week for corporate news with almost nothing scheduled on today’s diary and the main focus on an annual general meeting for Royal Bank of Scotland Group PLC (LON:RBS) tomorrow and full-year numbers from transport firm Firstgroup PLC (LON:FGP) and platinum refiner Johnson Matthey PLC (LON:JMAT) on Thursday.
Significant events expected on Tuesday May 29:
Finals: Renold plc (LON:RNO), Kainos Group PLC (LON:KNOS)
Economic data: Nationwide UK house price index; US consumer confidence; US Case-Shiller house price index
Around the markets:
- Sterling: US$1.3317, up 0.1%
- Gold: US$1,303.30, an ounce, unchanged
- Brent crude: US$66.83 a barrel, down 1.6%
City Headlines:
- Government is 'poised to sell part of its stake in the bailed-out Royal Bank of Scotland - Daily Mail
- Smiths Group and ICU Medical in talks over healthcare merger – Financial Times
- TV mulls buying half of UKTV in deal with BBC – Daily Telegraph
- JAB set to buy Pret a Manger for US$2bn – Financial Times
- Amanda Staveley plots legal challenge to Barclays after Serious Fraud Office case dismissed – The Times
- WHSmith voted the UK's worst high street retailer in a survey by Which? - CityAM
- Coca-Cola launches its first alcoholic drink in Japan – BBC News
- Drones predicted to give British economy a £42bn lift by 2030 -The Guardian
- EU proposes total ban on plastic cutlery and straws to reduce single-use litter – The Independent
- Serge Dassault, French billionaire entrepreneur, dies at 93 – BBC News