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RBS drags down FTSE as Brexit hurts margins

RBS drags FTSE 100 lower, blaming weaker profits on Brexit uncertainty, while miner Glencore falls on news of an investigation by US authorities.

RBS drags down FTSE as Brexit hurts margins

Royal Bank of Scotland (RBS) has dragged the FTSE 100 lower, blaming lower first quarter profits on Brexit uncertainty, while miner Glencore (GLEN) also weighed over an investigation by US authorities.

The UK blue-chip index lost 30 points, or 0.4%, at 7,402 with RBS falling 5% to 239p after the bank reported lower first quarter profits, citing intensifying competition and Brexit uncertainty.

The results come a day after chief executive Ross McEwan announced he was to exit within a year.

While a net profit of £707 million in the first few months of the year was above the forecasted £546 million, it was below the £808 million RBS raked in last year.

The bank said the impact of Brexit on the economy and associated delays on businesses making borrowing decisions, made growth challenging.

‘Although this view should not come as a major surprise it does once again focus minds of investors who have become fatigued with Brexit on the possible consequences,’ said Graham Spooner, investment research analyst at The Share Centre.

‘We continue to recommend the shares as a "hold" for investors seeking growth, willing to accept a medium level of risk but emphasise the need for patience.’

Meanwhile, Glencore shares dipped 3% to 312p over an investigation by the US Commodity Futures Trading Commission as to whether the miner broke regulation with ‘corrupt practices’.

Oil majors Shell (RDSb) and BP (BP) traded lower, down 1% at £24.71 and 2% at 560p respectively, after the oil price slumped on expectations that producer club Opec would soon raise output. Brent crude futures were down 1% to $73.41 a barrel.

Just Eat (JE) fell 3% to 725p as the takeaway website pointed to warm weather in February and a later Easter as the reasons behind weaker order growth in the first quarter.

AJ Bell investment director Russ Mould was sceptical of the ‘made to order’ excuses and argued the business was ‘a ship without a captain’ following the surprise exit of its chief executive Peter Plumb earlier this year.

‘What it doesn’t mention is the increasingly competitive landscape for online takeaways with Deliveroo and Uber Eats making plays for market share,’ said Mould.

‘The company has already responded to the competitive threat with a change of model, investing in delivery services at the expense of short-term profitability.’

‘But this alienated some investors who liked the strategy of simply providing an online platform for local takeaways, and thus avoiding having to spend that much cash.’

WPP (WPP) rebounded from early session losses, with shares in the world’s biggest advertiser up 3% to 930p, suggesting investors had become less concerned by the nearly 9% drop in first quarter underlying sales in North America. The firm admitted the results were disappointing but were in line with expectations.

The FTSE 250 gave up 57 points, or 0.3%, at 19,815 with iron ore miner Ferrexpo (FXPO) seeing a fifth of share value wiped out, down to 213p.

Deloitte said it had resigned as Ferrexpo’s auditor, just days after the miner said some of its donated charity funds in the Ukraine may have been ‘misappropriated’.

Hastings (HSTG) slid 11% to 194p, after the insurer warned its loss ratio for the year could be at the higher end of the target range, due to an increase in third-party property damage costs.

Stagecoach (SGC) shares surged 9% to 133p, following the transport operator announcing a £60 million share buyback programme.

Computacentre (CCC) jumped 16% to £12.46 as the IT services company managed to keep to first quarter targets.  

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