London open: Stocks drop amid trade concerns but Whitbread surges on Costa sale
London stocks fell early on Friday as trade concerns resurfaced, with US President Trump threatening to pull out of the World Trade Organization, but Whitbread was a bright spot as it agreed to sell its Costa coffee chain for £3.9bn.
At 0835 BST, the FTSE 100 was down 0.3% to 7,490.63, while the pound was flat against the dollar at 1.3010 and 0.1% lower versus the euro at 1.1134.
Mike van Dulken at Accendo Markets said: "Negative sentiment stems from reports that President Trump is mulling tariffs on another $200bn of Chinese imports. He also threatened to abandon the WTO, rejecting an EU olive branch on auto tariffs (zero) while new-NAFTA trade negotiations with Canada remain deadlocked."
Trump claimed on Thursday that the WTO does not treat America fairly. In an interview with Bloomberg, he said: "If they don't shape up, I would withdraw from the WTO." His comments followed reports that Trump had told White House aides he wanted to withdraw from the WTO.
There were also reports that the US President wants to ramp up the trade war with China and hit the country with tariffs on another $200bn worth of Chinese goods as early as next week.
On the UK data front, the latest survey from Nationwide revealed that house prices suffered their biggest monthly fall in August since July 2012.
House prices were down 0.5% on the month compared with a 0.7% increase in July, missing expectations for a 0.1% rise.
On the year, prices ticked up 2%, down from a 2.5% jump the previous month and below expectations for a 2.7% increase.
Nationwide's chief economist Robert Gardner said that despite the softening, annual house price growth remains within the fairly narrow range of around 2-3% which has prevailed over the past 12 months, suggesting little change in the balance between demand and supply in the market.
"Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates. Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on house price growth and market activity this year, though borrowing costs are likely to remain low."
In corporate news, Whitbread surged 17% as it agreed to sell the Costa coffee chain to Coca-Cola for £3.9bn. The Premier Inn owner, which bought Costa back in 1995 for £19m, said the transaction represents an enterprise valuation multiple of 16.4x Costa's FY18 earnings before interest, taxes, depreciation and amortisation and the valuation is significantly higher than is currently reflected for Costa in Whitbread's market value.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "This is a bitter sweet moment for Whitbread investors.
"On the one hand £3.9bn is an undeniably rich valuation and likely far better than Costa could achieve as an independently listed company, valuing its earnings higher than those of the mighty Starbucks. On the other, Costa has long been the jewel in Whitbread’s crown and some will be sad to see it go at any price, especially given the growth potential in China and elsewhere."
AstraZeneca ticked higher even as its experimental lupus drug anifrolumab failed to meet its main target in a late-stage clinical study, while John Laing Infrastructure nudged up as it said first-half pre-tax profit rose to £89m from £34.7m a year earlier.
EasyJet flew higher after an initiation at 'buy' by Citi, while British Airways parent IAG was also on the front foot after Davy Research lifted the stock to 'outperform'.
Gaming technology company Playtech rallied on news that New York hedge fund Springowl Asset Management has taken a $100m stake in the group.
On the downside, Sage tumbled after announcing that chief executive officer Stephen Kelly was stepping down.
Elsewhere, Admiral was downgraded to 'hold' at Peel Hunt, while ITV was cut to 'equalweight' at Morgan Stanley. Anglo American was lifted to 'reduce' at Alphavalue and Wizz Air was initiated at 'neutral' by Citi.
FTSE 100 - Risers
Whitbread (WTB) 4,733.00p 17.74%
easyJet (EZJ) 1,549.00p 1.34%
International Consolidated Airlines Group SA (CDI) (IAG) 701.60p 1.04%
Paddy Power Betfair (PPB) 7,088.37p 0.90%
WPP (WPP) 1,287.00p 0.70%
Centrica (CNA) 144.23p 0.40%
Royal Mail (RMG) 453.00p 0.40%
Fresnillo (FRES) 909.68p 0.38%
NMC Health (NMC) 3,970.00p 0.35%
Tesco (TSCO) 245.10p 0.16%
FTSE 100 - Fallers
Sage Group (SGE) 602.00p -6.75%
Burberry Group (BRBY) 2,272.00p -1.52%
Melrose Industries (MRO) 224.60p -1.45%
ITV (ITV) 159.85p -1.36%
GVC Holdings (GVC) 1,096.00p -1.26%
Glencore (GLEN) 318.85p -1.25%
Taylor Wimpey (TW.) 167.90p -1.15%
BHP Billiton (BLT) 1,647.80p -1.10%
Associated British Foods (ABF) 2,288.00p -1.00%
British American Tobacco (BATS) 3,745.00p -0.89%
FTSE 250 - Risers
Playtech (PTEC) 527.60p 4.43%
Bakkavor Group (BAKK) 189.80p 2.26%
Hunting (HTG) 865.50p 1.94%
Premier Oil (PMO) 123.02p 1.75%
RHI Magnesita N.V. (DI) (RHIM) 4,996.00p 1.75%
Elementis (ELM) 262.89p 1.66%
Millennium & Copthorne Hotels (MLC) 519.00p 1.57%
WH Smith (SMWH) 2,100.00p 1.45%
Kier Group (KIE) 952.00p 1.28%
Cairn Energy (CNE) 244.00p 1.24%
FTSE 250 - Fallers
Keller Group (KLR) 1,016.00p -2.87%
OneSavings Bank (OSB) 411.80p -2.46%
Serco Group (SRP) 99.70p -1.77%
IWG (IWG) 232.20p -1.74%
AA (AA.) 110.20p -1.61%
Essentra (ESNT) 436.60p -1.58%
Weir Group (WEIR) 1,875.50p -1.29%
Domino's Pizza Group (DOM) 286.80p -1.24%
Senior (SNR) 321.00p -1.23%
Indivior (INDV) 267.12p -1.07%