LONDON MARKETS: FTSE 100 Ends Lower As Miners Fall, But Supermarket Stocks March Higher
Services sector PMI falls short of expectations
U.K. blue-chip stocks ended lower Tuesday, with mining shares struggling in particular, as investors assessed downbeat British services data.
But supermarket stocks stood out as they marched higher.
What markets are doing: The FTSE 100 index shed 0.2% to end at 7,327.50, erasing a bit of Monday's advance of 0.5% (http://www.marketwatch.com/story/ftse-100-leaps-propelled-by-progress-on-us-tax-cuts-2017-12-04).
Brexit concerns helped send the pound down against the dollar, but that didn't pump up equities much. The pound fell to $1.3448, from $1.3478 late Monday in New York. Against the euro, sterling bought EUR1.1379, up slightly from EUR1.1360 on Monday.
What's moving markets: New data releases cast a downbeat light on the U.K.'s economic health.
A reading on activity in the U.K. services sector, which makes up roughly 80% of the British economy, missed by a wide mark. IHS Markit's November services purchasing managers index fell to 53.8, below the 55.0 consensus estimate from FactSet.
Meanwhile, U.K. demand for new cars fell for an eighth straight month in November, according to the Society of Motor Manufacturers and Traders.
Investors are keeping an eye out for developments in the Brexit talks after U.K. Prime Minister Theresa May and European Commission President Jean-Claude Juncker said Monday the two sides had failed to reach a deal that would move negotiations on to the second stage. That failure jolted the pound (http://www.marketwatch.com/story/pound-slides-to-6-day-low-as-brexit-talks-hit-deadlock-again-2017-12-05) (http://www.marketwatch.com/story/pound-slides-to-6-day-low-as-brexit-talks-hit-deadlock-again-2017-12-05).
Reports said Northern Ireland's Democratic Unionist Party, which is propping up May's Conservative government, had scuttled a proposed agreement (http://www.marketwatch.com/story/uk-eu-move-closer-to-breakthrough-in-brexit-talks-2017-12-04) by shooting down a plan to avoid a post-Brexit "hard" border between the province and Ireland.
British officials have been working to settle some issues before EU leaders meet at a summit on Dec. 14-15.
What strategists are saying: "Unlike the stellar numbers put on the board by its manufacturing and construction PMI peers, the services data drastically missed forecasts. Yet that slowdown was just the latest kick in the gut for an already battered pound, as the currency continued to fall following Monday's Irish border Brexit bait and switch," said Connor Campbell, financial analyst at Spreadex, in a note.
Normally a fall in sterling "would green light some decent growth by the FTSE," Campbell pointed out, but noted that a slide in copper prices on Tuesday was weighing on shares of miners.
Miners slump: Mining shares were down even as data showed activity in China's services sector expanded in November (http://www.marketwatch.com/story/chinas-service-sector-activity-picks-up-2017-12-04), which would bode well for the world's second-largest economy, where companies are major buyers of industrial and precious metals.
Anglo American PLC (AAL.LN) lost 2.5%, and Glencore PLC (GLEN.LN) gave up 2.3%. Those two names were the FTSE's biggest losers.
Antofagasta PLC (ANTO.LN) fell by 1.7%, Randgold Resources PLC (RRS.LN) (RRS.LN) shed 0.6%, and silver and gold producer Fresnillo PLC (FRES.LN) pulled back by 1%.
Retail gain: Supermarket chain Tesco landed a ratings upgrade from Goldman Sachs, making its stock one of the FTSE 100's biggest gainers.
Overall, consumer-related shares rose after the British Retail Consortium and KPMG said retail sales in November rose 1.5% year-over-year following a dip in October. Food sales were the biggest part of that growth.
BRC-KPMG, however, did note that Black Friday sales resulted in a "meager" rise of 0.6% in like-for-like sales in November.
Tesco PLC (TSCO.LN) (TSCO.LN) closed 3% higher after Goldman Sachs raised its rating on the supermarket chain to buy from sell. Shares of rival J Sainsbury PLC (SBRY.LN) leapt 2.8%, and shares of Wm. Morrison Supermarkets PLC (MRW.LN) rose 2.2%.
Read:European 'FANG' stocks? They exist, but here's why you shouldn't buy them (http://www.marketwatch.com/story/european-fang-stocks-they-exist-but-heres-why-you-shouldnt-buy-them-2017-11-27)
Auto focus: U.K. demand for new cars fell 11.5% in November, the SMMT said Tuesday.
Off the FTSE 100, shares of auto dealers were mixed after the report. Inchcape (INCH.LN) shed 0.2%, while Lookers PLC (LOOK.LN) finished flat. Pendragon PLC (PDG.LN) gained 6.7% to 28 pence.
Other stock movers: Also off the FTSE 100, Cineworld Group PLC (CINE.LN) shares fell 0.5% after the movie-theater operator said it will buy U.S.-based Regal Entertainment Group (http://www.marketwatch.com/story/cineworld-buying-regal-for-36-billion-to-reach-into-us-movie-theater-market-2017-12-05)(RGC) for $3.6 billion.
(END) Dow Jones Newswires
December 05, 2017 12:24 ET (17:24 GMT)