25th Sep 2019 16:51
(Alliance News) - Stocks in London ended in the red on Wednesday, weighed down by political storms brewing on both sides of the Atlantic.
US President Donald Trump scrambled to defend his presidency one day after Democrats in Congress launched a formal impeachment inquiry, accusing him of betraying the country to get dirt from Ukraine on political rival Joe Biden.
A transcript released by the White House showed Trump discussed a potential corruption investigation into Joe Biden, his political rival, in a phone call with Ukrainian President Volodymyr Zelensky in July.
Trump has insisted there was "no quid pro quo" in the call and denied any wrongdoing. Moreover, the president took to Twitter with a declaration Democrats were acting on sheer hatred and treating him worse than any other US leader.
"The Democrats are frozen with hatred and fear. They get nothing done. This should never be allowed to happen to another President. Witch Hunt!," Trump tweeted.
On Tuesday, House Democrat Nancy Pelosi suddenly abandoned months of resistance and announced the impeachment investigation.
Only two presidents in US history have been impeached, Andrew Johnson in 1868 and Bill Clinton in 1998, deeply tarnishing both of their legacies.
Forex.com analyst Fawad Razaqzada said: "Following yesterday's big drop in the stock markets and some further downside follow-through, bearish speculators were now wondering whether to ease off the gas or put the pedal to the metal amid a flurry of worries ranging from raised geopolitical tensions to slowdown in global growth and the potential impeachment of a business-friendly Trump.
"They know too well all it takes is a tweet or two from Trump to cause an abrupt move in the markets, especially on the issue of US-China trade."
"What's more, the decision by Pelosi to launch a formal impeachment inquiry into Trump may end up being a non-event after all. Indeed, it will require at least 20 Republicans to flip on Trump to officially oust him. Furthermore, the recent policy U-turn by many central banks, many of whom have returned to an easing bias from neutral or hawkish, means yields are falling again and so many stock market bulls will be lurking around for opportunities to pick up some bargains following this mini correction," he continued.
"Admittedly, there is still a good chance we may see a more profound correction in the markets, but this will probably require something more significant to happen."
The FTSE 100 index closed down 1.44 points at 7,289.99. The large cap index had touched an intraday low of 7,212.96 in morning trade.
The FTSE 250 ended down 144.15 points, or 0.7%, at 19,774.92, and the AIM All-Share closed down 6.41 points, or 0.7%, at 874.69.
The Cboe UK 100 ended down 0.1% at 12,360.14, the Cboe UK 250 closed down 0.8% at 17,687.22, and the Cboe Small Companies ended down 0.1% at 10,861.72.
In Paris the CAC 40 ended down 0.8%, while the DAX 30 in Frankfurt ended down 0.6%.
On the London Stock Exchange, tobacco stocks British American Tobacco and Imperial Brands ended the best blue chip performers, up 3.3% and 2.3% respectively, after two major US players abandoned merger talks.
Amid a regulatory crackdown on e-cigarettes in the US, the potential USD200 billion merger between Altria Group and Philip Morris International collapsed, with the two companies saying efforts to reach a deal had failed.
The transition to e-cigarettes and other devices offered a ray of hope to old-guard tobacco merchants facing a long-standing sales decline and falling smoking rates.
However, with at least nine dead and hundreds sickened from causes potentially tied to some vaping products, and soaring use among teenagers, the regulatory landscape for e-cigarettes has deteriorated this year.
AJ Bell's Russ Mould said: "British American Tobacco and Imperial Brands are both up thanks to the decision by Philip Morris and Altria to end their merger talks. The deal was not popular with the shareholders of either US firm but it could have potentially created a formidable rival to the two British companies, in terms of volume, scale and its ability to invest in next-generation products, thanks in part to Altria's investment in Juul.
"The regulatory pushback against vaping in the US may be one reason why Philip Morris and Altria have decided not to reunite, following the demerger of 2008 and Juul has not only changed chief executive but its marketing strategy too. Philip Morris and Altria will instead focus on IQOS, a heated tobacco product rather than a vapour one - although where this leaves Altria's near-USD13 billion investment in Juul in return for a 35% stake remains open to question."
On Wall Street, Philip Morris was up 5.9% and Altria was down 1.6%.
J Sainsbury closed up 1.6% after the supermarket chain announced a series of cost cutting plans to save GBP500 million over the next five years.
The grocer said it will "immediately stop new mortgage sales" and have no more "capital injections" after a GBP35 million investment in the year ending February 2020. It also aims to cut the cost to income ratio by around 50%.
In addition, Sainsbury's said an internal review resulted in plans to launch 10 new supermarkets but close between 10 to 15. Roughly 100 new convenience stores will be built but between 30 and 40 will be closed. It also plans to open roughly 80 new Argos stores, but close between 60 and 70.
"A reshuffle of the store estate is seeing more Argos stores moved into Sainsbury supermarkets while the convenience business gets a shot in the arm - that should help the group make the most of a growing click & collect business and capitalise on the 'on-the-go' trend while also saving money. Sainsbury's Bank is in line for a total overhaul as the group follows rival Tesco out of the mortgage market, boosting returns as costs fall. The balance sheet hasn't escaped the finance teams' withering glance either - with a new deal set to cut pension cash costs and savings being used to cut debt," said Hargreaves Lansdown's Nick Hyett.
At the other end of the large cap index, tour operator TUI ended the worst performer, down 3.4%, having enjoyed a strong run following the collapse of smaller rival Thomas Cook earlier this week. The stock has risen 8.0% since Monday.
The pound was quoted at USD1.2360 at the London equities close, down from USD1.2469 at the close Tuesday, as the dust settled on the Supreme Court's ruling UK Prime Minister Boris Johnson's decision to suspend Parliament was unlawful.
Johnson was forced to cut short his visit to the United Nations in New York and fly back across the pond to explain the legal defeat.
Attorney General Geoffrey Cox on Wednesday also faced questions about his legal advice which indicated the five-week suspension would be within the law.
Despite calls for Johnson to resign, opposition leaders appear split over how to proceed and there appears little prospect of an imminent motion of no confidence to oust the PM.
"Whatever pleasure the currency took in the Supreme Court deciding Boris Johnson's prorogation of Parliament was unlawful has been replaced with concern over what happens next, especially since there is increased talks of the government trying to force the country towards a general election. And with a busy Commons schedule this afternoon, the drama likely isn't over for the pound just yet," commented Spreadex analyst Connor Campbell.
The euro stood at USD1.0960 at the European equities close, lower than USD1.1001 late Tuesday.
Stocks in New York were higher at the London equities close after Trump, speaking at the United Nations, said a trade deal with China could happen "sooner than you think".
The S&P 500 index was up 0.2% and the Nasdaq Composite was up 0.3%, while the DJIA was up 0.6%.
Boeing added to the Dow's gains, advancing 1.5% on Wall Street. The aerospace giant announced a number of reforms to its board and corporate structure to highlight safety concerns after two crashes led to 346 fatalities and the grounding of its popular 737 MAX plane.
Brent oil was quoted at USD61.45 a barrel at the equities close, sharply lower than USD63.68 at the close Tuesday.
The Energy Information Administration reported US crude supplies rose for a second week in a row, by 2.4 million barrels for the week ended September 20. They were forecast to fall by 190,000 barrels, according to analysts.
Gold was quoted at USD1,523.10 an ounce at the London equities close, slightly lower than USD1,525.82 late Tuesday.
The economic events calendar on Thursday has US second quarter GDP readings and quarterly personal consumption expenditure prices at 1330 BST.
The UK corporate calendar on Thursday has annual results from sofa retailer DFS Furniture. There are also trading statements from energy provider SSE, pub and restaurant company Mitchells & Butlers and travel food concessions operator SSP Group.
By Arvind Bhunjun; [email protected]
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Related Shares:
British American TobaccoTUI.LSainsbury'sImperial Brands