UK shares weaken, Tullow loses half its market cap

(Reuters) - London’s exporter-heavy FTSE 100 inched lower on Monday as oil majors and Asia-exposed financials fell on China growth worries and as the pound strengthened, while a 72% slump in Tullow Oil single-handedly dragged down midcaps.

FILE PHOTO: A trader monitors her screen on a trading floor in London January 22, 2010. REUTERS/Stefan Wermuth

The blue-chip index .FTSE was gave up 0.1%, with its dollar earners including spirits company Diageo DGE.L and pharmaceutical giant AstraZeneca AZN.L taking a hit from gains in sterling ahead of UK general election later this week.

The FTSE 250 midcap index .FTMC was also down by the same level, with Tullow Oil TLW.L recording its steepest one-day fall since early 2004 after the oil and gas explorer scrapped dividend and announced the exit of its CEO.

Monday's drop wiped off roughly half of Tullow's market cap, or 1 billion pounds ($1.28 billion), as the stock tumbled to its lowest in 15-1/2 years. Rival Premier Oil PMO.L also fell 8%.

Other news-related moves saw Tesco TSCO.L top the bluechip index with a 5% rise after the retailer started a review of its operations in Thailand and Malaysia.

Helping limit losses on the midcap bourse was engineering firm Senior Plc SNR.L, which jumped 7% on news that it was reviewing options for its aerostructures business. Marks & Spencer MKS.L added 3.5% after a double upgrade from Goldman Sachs.

Elsewhere, China’s exports in November shrank for the fourth consecutive month, fanning worries over the impact of the Sino-U.S. trade war on the world’s second-largest economy and overshadowing Friday’s strong U.S. jobs data.

“The contrasting U.S. and Chinese data should swing the trade negotiation pendulum back to neutral from the Chinese side amongst the world’s trade watchers,” OANDA analyst Jeffrey Halley said.

Investors were also trying to size up the chances of a new round of U.S. tariffs on $156 billion worth of Chinese goods from Dec. 15.

While signs of progress in the trade negotiations lifted the FTSE 100 to its biggest one-day gain since July on Friday, the bourse still marked its steepest weekly fall after contradictory messages from U.S. President Donald Trump earlier on.

“More soothing noises on the negotiations emerged from Washington D.C. on Friday, but one gets the sense that this Sunday’s next round of tariffs on China is no longer the line in the sand it once was perceived to be,” Halley said.

On Monday, some of Britain's more domestically-exposed firms such as Lloyds LLOY.L and Barclays BARC.L outperformed as investors bet on the Boris Johnson-led Conservatives to win the election this week and deliver Brexit.

“Three days to polling day and the polls are looking good for Boris Johnson..., although the spectre of tactical voting still lingers,” Raymond James analyst Chris Bailey said.

Graphic - Tullow Oil largely lagging FTSE 250 since 2017:

Reporting by Muvija M and Shashwat Awasthi in Bengaluru with additional reporting by Tanishaa Nadkar; Editing by Arun Koyyur and Mark Heinrich