Rioting in Hong Kong, leadership bids in the UK and the ongoing China-US trade dispute threats left markets quiet and subdued on Wednesday.
The FTSE 100 ended a six-day run of daily growth, closing down 30.83 points, or 0.42%, at 7,367.62, with low volumes of shares trading hands.
In Europe, German and French markets also saw gentle falls on a quiet day. Germany’s Dax market was down 0.33% and France’s Cac closed 0.62% off.
David Madden, market analyst at CMC Markets UK, said: “Investor sentiment has been eroded a little today as traders were reminded that the trade dispute between the US and China is still alive and well.
“President Trump maintained his firm stance against China, and is still leaving the door open to the prospect of higher levies too. On the other side of the divide, China is equally content to maintain its hard line position against the US, and dealers trimmed some of their positions in light of recent gains.”
The different messages coming from the various Conservative MPs vying for the leader’s job knocked the pound slightly, down 0.28% on the US dollar to 1.269, and down 0.12% on the euro at 1.122.
But Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said investors should look at the similarities – including looser spending limits – and not read too much into the vote in Parliament proposed by Labour to block any no-deal Brexit.
He explained: “Markets are too focused on Brexit risks and are overlooking the potential economic upside from fiscal policy. Nearly all Tory leadership candidates are proposing policies that would entail much higher borrowing.
“Although MPs voted [on Wednesday] 298-to-309 against Labour’s plan to take control of parliamentary business later this month — this might have provided a means of blocking a no-deal Brexit — Tory MPs do not want to undermine their new leader’s attempts at renegotiating with the EU before they have begun. More Tory MPs likely would be prepared to block no deal if it was an imminent prospect.”
In London, British American Tobacco failed to convince investors that its plans for the future lived up to expectations.
Bosses at the company behind Benson & Hedges, Lucky Strike and Dunhill said sales from its e-cigarette division will rise between 30% and 50% this year, but shares closed down 4.4% at 2,936p, making it the biggest faller on the FTSE 100.
A cut in growth forecasts for oil by the US Energy Information Administration also took a toll, with BP falling 2.91% to 540.8p. Donald Trump’s war of words also hit Asia-focused bank Standard Chartered, which closed down 2.54% at 683.8p.
The announcement also sent Brent Crude prices down 2.04% to 61.02 US dollars a barrel.
Closer to home, car dealer Pendragon suffered a 20.9% drop to its share price – an all-time low – to 18.2p after warning it expects to be “significantly” loss-making in the first half as it tackles trading woes and a pile-up of unsold used cars.
At the other end of the spectrum, the biggest riser was Reckitt Benckiser – up 4.38% to 6,675p – as investors reacted positively to the news that the Cillit Bang and Durex owner appointed Laxman Narasimhan as its new boss.
The former PepsiCo chief commercial officer replaces Rakesh Kapoor, who steps down in September.
Fast fashion online business Boohoo watched shares rise 1.04% to 232.5p, after first quarter group revenues surged by 39% after strong growth across all its brands.