London stocks were knocked back into the middle of last week on Tuesday after a the market shrugged at the Chancellor's spring statement but was unsettled by another sacking in the White House.
Having been steady up until midday, the FTSE 100 lost 75.98 points or 1.05% to finish at 7,138.78, where it was last Wednesday morning.
The pound climbed back to levels last seen in mid February, rising 0.6% against the dollar to 1.3985, and flat against the euro, which was in turn up 0.6% versus the greenback.
Arriving during the middle of Philip Hammond's big moment to throw London and Wall Street traders a curve ball, was Donald Trump's giving Secretary of State Rex Tillerson the axe. The ex-oilman was sent skidding out of the White House with only his $174m of tax-free Exxon Mobil shares for solace after a series of disagreements with the President.
Just hours before he was given the boot, Tillerson warned that the poisoning of Russian defector Sergei Skripal and his daughter was from Russia and would “certainly trigger a response.” Trump announced on Twitter that CIA Director Mike Pompeo would be the new Secretary of State.
Meanwhile, in Westminster, Philip Hammond declared himself “Tigger-like” as he held out the prospect of increases to public spending and set out improved short-term figures for UK economic growth and the public finances, including lower than expected government borrowing in 2017-18. In his spring statement, the Chancellor resisted calls for short-term spending on the NHS and other services but his statement appeared to acknowledge the concerns of Conservative MPs who have called for austerity to be eased.
He said the Office for Budget Responsibility had revised its predictions to reflect improved prospects for the public finances. The OBR said government borrowing would be £45.2bn in 2017-18 – down from a forecast of £49.9bn in November.
But the OBR's report showed that Hammond's upbeat statement that there is “light at the end of the tunnel” for the UK economy after years of austerity is based almost entirely on an improved global economy rather than any domestic improvement.
Paul Johnson, director of the Institute for Fiscal Studies, said there was little cause for celebration in the OBR's projections. Johnson tweeted: “To be clear – against a long term trend of at least 2% a year growth, after poor growth since 2008, and compared with growth across rest of OECD, these are not encouraging forecasts.”
Analyst Chris Beauchamp at IG added: “The Spring budget statement served up predictably thin gruel for markets, with the Chancellor able to offer little in the way of excitement. It would not do to attribute the bounce in the pound to the OBR's forecasts, and the news that the UK won't stop throwing money across the Channel until some forty years hence will not exactly excite the Leave Camp. Brexit remains the only game in town.”
In economic data, the US news again trumped the UK, with CPI coming in bang in line with forecasts. According to the Labor Department, the consumer price index rose 0.2% last month following a 0.5% increase the month before, in line with economists' expectations.
Treasury yields pulled back, which normally might be expected to help stocks but the higher pound was the stronger influence, while lower yields also hit global financial stocks.
In corporate news, Irish food company Greencore tanked 30% after it issued a profit and said chief executive Patrick Coveney will spend half his time in the US as part of a restructuring.
Interdealer broker TP Icap tumbled as its full-year adjusted results fell short of consensus, while Computacenter fell sharply as it posted a 23% jump in full-year pre-tax profit but said the growth outlook for 2018 remains challenging.
Retirement specialist Just Group was down as it said deputy chairman Tom Cross Brown will retire.
Merchant bank Close Brothers retreated even as it posted a 6% jump in first-half adjusted operating profit thanks to a good performance across its businesses.
Legal & General Group edged lower after announcing that its Legal & General Capital division has acquired the 52.1% of CALA Homes which it did not previously own.
Anglo American was in the red as production at the company's massive Minas-Rio mine in Brazil was halted due to a ruptured slurry pipeline, while Cairn Energy was hit by profit taking as it reported a swing back to profits.
On the upside, Antofagasta gained as it increased its dividend 177% for last year as cash flow surged, though the Chilean copper miner is facing strike action at its Los Pelambres mine.
Engineer GKN was another FTSE 100 gainer after it rejected a sweetened offer from turnaround specialist Melrose Industries a day earlier. Melrose was also in the black.
In broker note action, Barclays was added to Deutsche Bank's 'buy' list, while LondonMetric Property was raised to 'equalweight' at Morgan Stanley.
Direct Line was cut to 'hold' from 'buy' by Deutsche Bank, industrial flow-control equipment maker Rotork was downgraded to 'sell' at Investec and Morgan Stanley cut Inmarsat's target price from 550p to 500p but stayed at an 'equalweight'.
FTSE 100 (UKX) 7,138.78 -1.05%
FTSE 250 (MCX) 19,863.23 -1.26%
techMARK (TASX) 3,339.18 -1.51%
FTSE 100 – Risers
Antofagasta (ANTO) 918.00p 3.02%
Glencore (GLEN) 376.70p 2.07%
GKN (GKN) 430.00p 1.39%
easyJet (EZJ) 1,627.16p 1.37%
Ferguson (FERG) 5,308.00p 1.07%
Randgold Resources Ltd. (RRS) 6,044.00p 0.97%
Bunzl (BNZL) 2,063.00p 0.88%
Kingfisher (KGF) 354.10p 0.85%
DCC (DCC) 6,820.00p 0.52%
Hammerson (HMSO) 455.60p 0.35%
FTSE 100 – Fallers
BT Group (BT.A) 227.15p -3.34%
St James's Place (STJ) 1,113.00p -3.22%
WPP (WPP) 1,159.00p -3.01%
Johnson Matthey (JMAT) 3,157.00p -2.86%
3i Group (III) 898.00p -2.71%
BAE Systems (BA.) 580.80p -2.65%
Legal & General Group (LGEN) 256.70p -2.54%
G4S (GFS) 253.50p -2.53%
Direct Line Insurance Group (DLG) 383.30p -2.52%
Admiral Group (ADM) 1,898.50p -2.42%
FTSE 250 – Risers
Millennium & Copthorne Hotels (MLC) 570.00p 2.89%
Senior (SNR) 309.80p 2.86%
Polymetal International (POLY) 792.40p 2.72%
IG Group Holdings (IGG) 821.00p 2.63%
Acacia Mining (ACA) 147.75p 2.07%
Ferrexpo (FXPO) 297.80p 1.99%
888 Holdings (888) 299.60p 1.84%
Provident Financial (PFG) 942.00p 1.57%
Vedanta Resources (VED) 772.20p 1.34%
Daejan Holdings (DJAN) 6,080.00p 1.33%
FTSE 250 – Fallers
Greencore Group (GNC) 127.25p -30.31%
TP ICAP (TCAP) 482.70p -10.51%
Cairn Energy (CNE) 193.60p -8.16%
Computacenter (CCC) 1,036.00p -8.16%
JD Sports Fashion (JD.) 359.50p -7.08%
Capita (CPI) 159.95p -6.33%
Inmarsat (ISAT) 386.70p -5.61%
Britvic (BVIC) 678.50p -5.57%
IWG (IWG) 238.40p -3.87%
Serco Group (SRP) 90.00p -3.74%