The FTSE 100 closed down 26.15 points or 0.4% to 7,030.46, while the pound was up 0.2% against the dollar at 1.4071 and mounted a late surge against the euro, up 0.5% to 1.1474 as traders looked a day ahead to the eurozone inflation reading.
April is set to be a strong month for cable, according to data dug up by BoA Merrill Lynch covering the past 14 years. The pound has gained on the dollar every single year since 2005 in what analysts said last week was the strongest seasonal trend among the currencies of the G10 countries. "This remarkable outperformance covers major events such as the financial crisis, general elections and the Brexit referendum, and suggests to us a consistently strong underlying flow which has trumped these idiosyncratic factors," Merrill said.
Equities had kicked the London session off with heavier losses, taking their cue from weakness on Wall Street, after China hit back at President Trump's levvies by imposing its own tariffs of up to 25% on 128 US imports, including pork and wine. China said the tariffs, which affect around $3bn of imports, were introduced to "safeguard the interests of the country and its industry" and balance the losses caused by the US tariffs.
Still, equities in London managed to pare losses to trade almost flat by early afternoon, as IHS Markit's manufacturing purchasing managers' index rose to 55.1 in March from a revised 55.0 the month before, beating expectations for a dip to 54.7.
Compared to official data, Markit said this suggested the first quarter as a whole delivered a 0.4-0.5% gain in production volumes, considerably slower than the fourth quarter’s 1.3% growth.
Input cost inflation and output charges eased slightly in March though remained high. Business optimism held steady at an elevated level, with over 54% of companies expecting output to expand over the coming 12 months.
"The latest PMI survey provided further evidence that UK manufacturing has entered a softer growth phase so far this year," said IHS director Rob Dobson.
"Although the pace of output expansion ticked higher in March, which is especially encouraging given the heavy snowfall during the month, this was offset by slower increases in new orders and employment. Average rates of increase over the opening quarter as a whole are also down noticeably from the growth spurt seen at the end of 2017."
Traders were seeing the mood as 'neutral', suggested Chris Beauchamp, chief market analyst at IG. "Investors have run through a selection of ‘reasons to be fearful’ over the past eight weeks, with the narrative changing as fast as the price," he said.
"Inflation scare, tariff wars, Facebook hacking, tariff wars again, and now concerns over Amazon, have all been cited as the culprits. In truth the market was merely overexposed and primed for a drop. Sentiment has moved back towards neutral, if not yet completely fearful, providing attractive risk-reward for those prepared to buy on weakness. Valuations are back to early 2016 levels for a number of indices, which should encourage more buying, while the upcoming earnings season should remind us all of the overall health of corporate USA."
In UK corporate news, Sky was trading higher as Twenty-First Century Fox offered up more concessions in its bid for the broadcaster, proposing either to ringfence Sky News or sell it to Walt Disney.
Shares in Fidessa surged on the FTSE 250 after the financial technology group said it has received approaches from two separate third parties who are considering making an offer for the company that trumps the one made by Switzerland's Temenos in February.
Randgold Resources gained as it said that intermittent industrial action by the workforce of its mining subcontractor was having "some" impact on operations at its Tongon gold mine, but confirmed the company's 2018 outlook remained within guidance.
Petrofac was up after being awarded a lump-sum engineering, procurement and construction contract by Vedanta Limited valued at around $233m.
AstraZeneca recovered from earlier losses, helped by news that US and European regulators have accepted applications for its cancer treatments, moxetumomab pasudotox and lynparza. A report in The Times that it and Shire have made millions of pounds in "secret" payments to healthcare professionals and organisations initially weighed on the shares but was later shrugged off.
On the downside, Anglo American ticked lower after suspending its Minas-Rio iron ore operation in Brazil following two pipeline leaks were found last month.
Engineer GKN was under the cosh after some weekend headlines about potential governmental intervention in the Melrose takeover. Newspapers have alluded to divisions in the cabinet, with Defence Secretary Gavin Williamson under pressure to intervene in the deal as GKN is a supplier to the Ministry of Defence, with implications suggested about potential national security issues.
Analysts at Olivetree Financial, however, said these tales are more to do with political ambition than a genuine threat to the deal. They pointed out that the whole defence arm of the aerospace division only employs around 750 people out of the 52,000 currently employed by GKN, with low volumes and "basically insignificant" revenues "and yet is the only part that it is really possible to argue there is any national security element surrounding".
Outsourcer Capita was the worst performer in the FTSE 350, in the red again after it emerged last week that British Airways had opted to keep its call centres in Newcastle and Manchester in-house, dashing expectations that the operations would be outsourced to Capita. In addition, investors were waiting for further details on the company's rights issue, which are due to be laid out with its full-year results on 26 April.
Spectris retreated after announcing the acquisition of US-based automotive test system and service provider Revolutionary Engineering for $19m.
In broker note action, Intertek and CMC Markets were both upgraded by Shore Capital, while Barclays was lifted to 'buy' at Investec and given a strong write-up by Morgan Stanley, while TP Icap was upped to 'outperform' at Macquarie.
Market Movers
FTSE 100 (UKX) 7,030.46 -0.37%
FTSE 250 (MCX) 19,398.01 -0.32%
techMARK (TASX) 3,250.57 -0.40%
FTSE 100 - Risers
Micro Focus International (MCRO) 1,011.00p 2.45%
Sky (SKY) 1,325.00p 2.12%
Smurfit Kappa Group (SKG) 2,928.00p 1.60%
Sage Group (SGE) 644.40p 0.88%
Lloyds Banking Group (LLOY) 65.13p 0.73%
Imperial Brands (IMB) 2,443.50p 0.72%
Glencore (GLEN) 356.25p 0.69%
AstraZeneca (AZN) 4,926.00p 0.62%
Coca-Cola HBC AG (CDI) (CCH) 2,649.00p 0.61%
Rio Tinto (RIO) 3,630.50p 0.54%
FTSE 100 - Fallers
Mediclinic International (MDC) 573.40p -4.59%
GKN (GKN) 446.20p -3.63%
Scottish Mortgage Inv Trust (SMT) 428.00p -3.21%
Fresnillo (FRES) 1,240.50p -2.21%
Centrica (CNA) 139.25p -2.07%
Rolls-Royce Holdings (RR.) 856.40p -1.95%
Whitbread (WTB) 3,630.00p -1.89%
G4S (GFS) 243.50p -1.85%
Prudential (PRU) 1,748.50p -1.77%
Shire Plc (SHP) 3,507.50p -1.76%
FTSE 250 - Risers
Fidessa Group (FDSA) 4,170.00p 13.78%
Sirius Minerals (SXX) 32.20p 6.06%
IP Group (IPO) 121.00p 5.58%
Purecircle Limited (DI) (PURE) 388.00p 5.43%
FirstGroup (FGP) 85.60p 4.26%
CLS Holdings (CLI) 243.50p 3.40%
Safestore Holdings (SAFE) 507.50p 3.36%
Big Yellow Group (BYG) 879.00p 3.05%
Dechra Pharmaceuticals (DPH) 2,708.00p 3.04%
Renewi (RWI) 77.00p 2.67%
FTSE 250 - Fallers
Capita (CPI) 133.40p -7.39%
RHI Magnesita N.V. (DI) (RHIM) 4,175.00p -5.11%
Inmarsat (ISAT) 346.30p -4.36%
IWG (IWG) 220.50p -3.59%
Contour Global (GLO) 232.00p -3.33%
BTG (BTG) 655.00p -3.11%
Vesuvius (VSVS) 566.50p -2.91%
IMI (IMI) 1,049.00p -2.87%
Electrocomponents (ECM) 584.00p -2.70%
Wizz Air Holdings (WIZZ) 3,167.00p -2.67%
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