Brexit-sensitive UK stocks sink on draft deal backlash

British stocks slid on Thursday after Brexit minister Dominic Raab quit in a blow to prime minister Theresa May's efforts to win backing for her draft deal to exit the EU.

Housebuilders, retailers and banks all fell, dragging the FTSE 250 index down 1.1 per cent, while the exporter-heavy FTSE 100 fell just 0.1 per cent, supported by a plunge in the value of sterling against the euro and the dollar.

The resignations of Mr Raab and pensions minister Esther McVey in protest at May’s draft deal for leaving the European Union pushed sterling down 1.6 per cent against the dollar amid raised expectations among traders of a second referendum, a “hard” Brexit and a general election.

Uncertainty

In the FTSE 100, Housebuilder Barratt sank 8 per cent, Persimmon and Taylor Wimpey fell 7 per cent, and Berkeley Group lost 5.4 per cent.

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Mid-cap housebuilder Bovis Homes fell 8.2 per cent, while Redrow and Crest Nicholson dropped by 5.5 per cent and 5.3 per cent respectively.

Barclays fell 6.2 per cent and RBS 7.6 per cent, with Lloyds down 4.4 per cent as domestic banks were knocked by the heightened political uncertainty.

Retailers were also hit, with Marks & Spencer down 5.7 per cent and Next down 5.4 per cent.

Debenhams fell another 6.8 per cent, after suffering its worst-ever day on Wednesday on a report high street suppliers are cutting ties with the department store group.

Paul Mumford, fund manager at Cavendish Asset Management, said there would “probably” be a few more resignations, increasing the uncertainty around the Brexit deal.

Mr Mumford said investors were selling sectors they see as vulnerable to a messy Brexit and domestic political uncertainty, while others await more clarity.

Royal Mail shares made a u-turn from their positive open, trading down 5.6 per cent after first-half profits dropped about 25 per cent as costs weighed.

Exporters

Shares in contractor Capita sank 8 per cent, the worst FTSE 250 performer, after the Financial Times reported it faces the loss of its NHS deal after failing to send letters with cervical screening dates or test results.

Asset manager Intermediate Capital Group was a rare gainer on the mid-caps index, up 7.7 per cent after its results showed a 17 per cent increase in first-half assets thanks to strong inflows of new money from clients.

On the FTSE 100, multinational exporters Unilever, Diageo, Reckitt Benckiser, British American Tobacco, and Imperial Brands were up by 1.2 to 2.5 percent as they gained from the weaker pound.

Strong mining stocks helped limit losses, with Randgold Resources, Rio Tinto, Glencore, and BHP Billiton rising 1.2 to 4 per cent on hopes of a rapprochement between the US and China on trade.

- Reuters