18th Dec 2019 16:57
(Alliance News) - Stocks in London ended mostly higher on Wednesday, with the FTSE 100 benefitting from weakness in the pound which fell as no-deal Brexit fears reemerged.
The internationally-exposed FTSE 100 index closed up 15.47 points, or 0.2%, at 7,540.75. The FTSE 250 ended down 27.07 points or 0.1% at 21,663.13, and the AIM All-Share closed up 7.24 points, or 0.8%, at 935.23.
The Cboe UK 100 ended up 0.4% at 12,801.94, the Cboe UK 250 closed up 0.1% at 19,580.67, and the Cboe Small Companies ended up 0.5% at 11,950.16.
In Paris the CAC 40 ended down 0.2%, while the DAX 30 in Frankfurt ended down 0.5%.
"Stocks market are mixed as the fear surrounding a no-deal Brexit is doing the rounds. Prime Minister Boris Johnson is planning to introduce new legislation which would stop any extension to the transition period, but that would leave open the possibility of a no-deal. The very mention of a no-deal Brexit is enough to rattle some traders, but the markets that have declined haven't fallen that much, which suggests the fear has not gripped the entire market. Like yesterday, the soft pound has helped the FTSE 100 - it hit its highest since early August," said CMC Markets analyst David Madden.
In the FTSE 100, Pearson closed up 1.7% after the education publisher agreed to sell the remaining 25% stake in Penguin Random House for USD675 million, part of which will be distributed to shareholders.
Person's stake in the book publisher will be sold to Bertelsmann SE & Co, which currently holds the other 75%. This transaction values the Penguin venture at an enterprise value of USD3.67 billion, compared with the USD3.55 billion enterprise valuation in 2017, when Pearson sold a 22% stake in the joint venture. The transaction is in line with Pearson's company simplification strategy, it said, and is expected to close in the first half of 2020.
With the cash, Pearson proposed a GBP350 million share buyback, which is expected to start in early 2020, it said.
At the other end of the large cap index, Meggitt ended the worst performer, down 2.6% after Panmure Gordon started coverage on the aerospace and defence company with a Sell rating.
In the FTSE 250, Senior ended the best performer, up 7.3% after Panmure Gordon started coverage on the engineer with a Buy rating.
The pound was quoted at USD1.3070 at the London equities close, down from USD1.3137 at the close Tuesday, as no-deal Brexit fears returned to haunt investors.
Sterling retreated sharply from the USD1.35 mark versus the greenback which was reached after the Conservative Party's resounding general election victory on Friday.
"We do not know the strength of Euroscepticism among the new intake of Conservative MPs. And the PM doubling-down on the commitment in the Tory manifesto to not extend the transition period beyond December 2020, by setting it into the Withdrawal Agreement Bill that MPs will sign-off in January. The stage is set, therefore, for Brexit risk to dampen the economy again in the second half of next year. This means that exports will continue to struggle, as multinationals hold back from locating production facilities in Britain and overseas firms give UK exports a wide berth, given the risk to supply chains in the event of no deal," analysts at Pantheon Economics said.
European Commission chief Ursula von der Leyen warned that failing to rapidly negotiate a new trade deal after Brexit would hurt the UK more than it would the EU.
"The timetable ahead of us is extremely challenging," she told the European Parliament in Strasbourg. "In case we cannot conclude an agreement by the end of 2020, we will face again a cliff edge. This would clearly harm our interests but it will impact more the UK than us."
On the economic front, UK inflation remained steady in November at a multi-year low, data from the Office for National Statistics showed.
The consumer price index rose 1.5% year-on-year in November, stable on the inflation rate recorded for October. October's reading had been the lowest rate recorded since November 2016, when it was 1.2%.
Month-on-month, consumer prices rose 0.2% in November, reversing a 0.2% fall the month before.
Consensus was for an annual inflation rate of 1.4% in November, and a monthly rate of 0.2%. The Bank of England targets a 2.0% inflation rate.
Sanlam UK Chief Investment Officer Phil Smeaton said: "The continued strength of labour markets and wage gains continue to build upward pressure on inflation. For the time being, it has been contained. But with an anticipated increase in consumer and investment spending, the economy is expected to benefit from a 'Boris bounce'. The Bank of England must guard against complacency. A new governor is set to take up the reins imminently, and they should expect to make some big decisions to make very early in their tenure."
On Thursday, the Bank of England is expected to keep interest rates on hold, as has been the case for the entirety of 2019, though this week's meeting could take a more dovish turn following weak economic data and the renewed threat of a no-deal Brexit next year.
The BoE will announce its latest monetary policy decision, alongside the release of the Monetary Policy Committee meeting minutes, at midday on Thursday.
There will be no press conference with BoE Governor Mark Carney. It currently is planned to be his penultimate MPC meeting.
It is widely expected the nine-strong MPC will vote to maintain the UK Bank Rate at 0.75%.
"The Conservative's decisive election victory eliminates near-term no-deal Brexit as a downside risk to the BoE's forecasts, which allows the MPC to look through recent growth weakness. We expect the MPC to hold [interest rates] this week and in early 2020. We expect another slowdown and a 25 basis points BoE insurance cut by August as the post-election growth bound fades and Brexit uncertainty resumes ahead of the next deadline," analysts at Citigroup said.
The euro stood at USD1.1125 at the European equities close, down from USD1.1152 a day before.
In economic news from the continent, the eurozone's annual inflation rate accelerated to 1.0% in November, Eurostat showed.
The rate had been 0.7% in October. The November figure was in line with market consensus. The inflation rate in November last year had been 1.9%.
The European Central Bank targets a rate "below, but close" to 2%.
"Despite the modest gain compared to October, the low inflation figures confirm that firms continue to struggle to pass on their rising costs to consumers. ECB resident Christine Lagarde admitted this fact in her first policy meeting last week and now faces the challenge of fulfilling the central bank's mandate. We therefore expect the ECB will continue to provide ample monetary stimulus next year," analysts at Oxford Economics said.
Against the yen, the dollar was trading at JPY109.52, unchanged from late Tuesday.
Stocks in New York were higher at the London equities close, setting fresh record highs on continued positive momentum from last week's US-China trade agreement.
The DJIA, the S&P 500 index and the Nasdaq Composite were all up 0.1%.
Brent oil was quoted at USD66.12 a barrel at the London equities close, up from USD65.92 at the close Tuesday.
Oil prices rose after the US Energy Information Administration reported a crude oil inventory draw for the week to December 13.
The draw came in at 1.08 million barrels, which compared with analyst expectations of a 1.28 million barrel draw.
Gold was quoted at USD1,475.70 an ounce at the London equities close, marginally lower than USD1,476.00 late Tuesday.
The economic events calendar on Thursday has the Bank of Japan's interest rate decision at 0300 GMT, UK retail sales figures at 0930 GMT and US current account numbers at 1330 GMT.
The UK corporate calendar on Thursday has interim results from gas and electricity services firm Bilby.
By Arvind Bhunjun; [email protected]
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