15th Dec 2020 17:03
(Alliance News) - Stocks in London ended mixed on Tuesday as investors grappled with more stringent coronavirus restrictions in the south east of England and uncertainty over Brexit, as the dealine draws closer.
UK Prime Minister Boris Johnson has said that leaving the EU without a free trade agreement still remains the "most likely outcome" as talks continue in Brussels.
The PM told his Cabinet that he was committed to continuing negotiations on the remaining areas of disagreement and re-emphasised the desire to strike a deal. But he said leaving without an agreement "remained the most likely outcome", according to Downing Street.
In addition, fears over rising coronavirus cases were weighing on sentiment. Scientists have warned that the easing of coronavirus restrictions over Christmas will cause a spike in infections, as London and some surrounding areas prepare to enter Tier 3.
The capital and parts of the commuter belt will be placed under the toughest measures - forcing the closure of hospitality - from Wednesday following a "very sharp" rise in cases.
UK Health Secretary Matt Hancock said higher infections in the South East may be in part due to a newly identified variant of coronavirus which is growing faster than the existing one.
The internationally-exposed FTSE 100 index closed down 18.51 points, or 0.3%, at 6,513.32. The domestic-focused FTSE 250 ended up 88.37 points, or 0.5%, at 19,852.39. The AIM All-Share closed up 2.69 points, or 0.3%, at 1,070.35.
The Cboe UK 100 ended down 0.3% at 649.32, the Cboe UK 250 closed up 0.8% at 17,187.87, and the Cboe Small Companies ended up 0.9% at 11,328.15.
In Paris the CAC 40 ended flat, while the DAX 30 in Frankfurt ended 1.1% higher.
"Brexit fears and more stringent Covid restrictions are holding back UK stocks, with consumption expected to shift online," said IG Group's Josh Mahony.
"Tier 3 lockdown measures being implemented in London will deal yet another blow for the UK retailers, with festive shopping likely to shift online. With many high street names already hanging by a string before the pandemic, there had been optimism that a surge in consumer activity over the course of December was set to provide a welcome boost for pubs, restaurants, and retailers alike," Mahony added.
The pound was quoted at USD1.3401 at the London equities close, up from USD1.3340 at the close Monday, as investors continue to hold out hope for a Brexit deal - in spite of the pessimistic tones from the PM.
The UK and EU's chief negotiators David Frost and Michel Barnier are continuing talks in Brussels after reports that progress in the talks could see a deal agreed this week.
For months the talks have been deadlocked on the issues of fishing rights, the "level playing field" to ensure neither side can unfairly compete with the other on environmental standards, workers' rights or state subsidies, and the legal mechanisms to govern any deal.
The UK's current trading arrangements with the EU expire at the end of the month, meaning any new deal would have to be in place by January 1.
Barnier is said to have told diplomats the UK had moved towards the bloc's demands on the level playing field, according to the Daily Telegraph. It said he told ambassadors the UK accepted a "rebalancing mechanism", meaning it could face tariffs if it moves too far away from EU rules.
The Guardian reported that European Commission President Ursula von der Leyen said there had been "movement" and talks were "on the very last mile".
Negotiations between the two sides were extended on Sunday after Johnson and von der Leyen agreed to continue the process despite major differences remaining. Negotiations will continue in the Belgian capital on Tuesday.
"The Brexit pendulum has swung back to optimism over the weekend. We argued last week that a landing zone on the most contentious Level Playing Field arrangements was still in sight, but that it required a political leap from both sides. The weekend newsflow suggests this leap has been taken. While we have always maintained that a deal was more likely than not, this impetus means that the market should now once again return to agreement being the strong base case, and a final wobble around fisheries should be looked through," said Deutsche Bank analyst Sheyas Gopal.
"We continue to see a move to around 1.36 in Cable upon completion of a deal. From there, the path of least resistance may remain to the upside on the back of dollar weakness, but we maintain our view that a Brexit deal is not a structural game changer for the pound against the euro," Gopal added.
Sterling recovered from an intraday low of USD1.3280 versus the greenback in early trade in the wake of the latest UK unemployment figures.
The UK unemployment rate edged up in October, the Office for National Statistics said on Tuesday, and there are now more than 800,000 fewer employees in November compared to before the coronavirus crisis first hit.
For the three months to October, the UK unemployment rate was 4.9%, up on the 4.8% recorded for the three months to September though beating expectations, according to FXStreet, of 5.1%. October's reading was 1.2 percentage points higher than a year earlier, the ONS said.
"We expect UK unemployment to rise to 6% by year-end, despite unprecedented wage support which probably meant over four million people were furloughed during the November lockdowns" said analysts at ING.
In the FTSE 100, JD Sports Fashion closed up 2.7% after the sportswear retailer agreed to buy San Jose, California-based Shoe Palace for USD325 million.
Of the cash consideration, USD100 million has been deferred and will be paid over the next 12 months. JD Sports said the acquisition will be funded from its existing cash resources and bank facilities.
For 2019, Shoe Palace delivered pretax profit of USD52 million on revenue of USD435 million. It was started in 1993 by the Mersho family and has 167 stores, most of which are under the Shoe Palace brand. About half the stores are in California, with some presence in seven other US states.
Shoe Palace will continue to be run by four brothers from the Mersho family but will start to share ideas with JD's other US operation, JD Finish Line, from next year.
The euro stood at USD1.2151 at the European equities close, higher against USD1.2130 late Monday. Against the yen, the dollar was trading at JPY103.72, up from JPY104.00 late Monday.
Stocks in New York were higher at the London equities close as another coronavirus vaccine moved closer to approval.
The DJIA was up 0.2%, the S&P 500 index up 0.5% and the Nasdaq Composite up 0.6%.
The US Food & Drug Administration released new data confirming Moderna's Covid-19 vaccine was safe and effective, a strong sign that it could receive emergency approval in days and be ready to roll out by next week.
The regulator said there were "no specific safety concerns identified that would preclude issuance of an emergency use authorisation" and confirmed an overall efficacy of 94.1%.
The FDA's documents included new data suggesting that the Moderna vaccine begins to prevent asymptomatic infections after the first dose. The ability of a vaccine to prevent asymptomatic infections is important because it could help significantly slow the spread of the coronavirus.
In a clinical trial of 30,400 people, 196 fell ill with Covid-19 by November 21, 11 of which were in the vaccine group and 185 in the placebo group.
Efficacy was 95.6% for people aged 18-65; 86.4% among those aged 65 and older; and 94.1% overall. Importantly, of 30 cases of severe Covid-19, all occurred in the placebo group.
Elsewhere, the US Federal Reserve's final monetary policy meeting of 2020 got underway Tuesday, with the central bank widely expected to keep rates at historic lows when it announces its decision on Wednesday.
Investors will be looking to see if the Fed will decide to lengthen the maturities of bond purchases, expand the total purchases and list what outcomes it wants to achieve before reducing the programme.
On the politcal front, Senate Majority Leader Mitch McConnell has congratulated Democrat Joe Biden as president-elect, saying "the Electoral College has spoken".
The Republican leader's statement, delivered in a speech on the Senate floor on Tuesday, ends weeks of silence over Donald Trump's defeat. It also comes a day after electors met and officially affirmed Biden's election win.
"I want to congratulate president-elect Joe Biden," McConnell said. "Our system of government has the processes to determine who will be sworn in on January 20. The Electoral College has spoken."
Brent oil was quoted at USD50.63 a barrel at the equities close, up sharply from USD49.24 at the close Monday.
"Brent crude oil and WTI have been lifted by the overall bullish mood that is circulating today. The sentiment surrounding the UK-EU trade talks has improved, the US political situation is looking more upbeat with respect to President-Elect Biden taking over in January and the Moderna news has helped too. All those stories bode well for the energy market," CMC Markets analyst David Madden explained.
Gold was quoted at USD1,847.70 an ounce at the London equities close, higher against USD1,826.61 late Monday.
The economic events calendar on Wednesday has UK inflation data at 0700 GMT and US retail sales figures at 1330 GMT. There are also PMI readings from Germany, eurozone and the UK at 0855 GMT, 0900 GMT and 0930 GMT respectively.
The UK corporate calendar on Wednesday has interim results from electical goods retailer Dixons Carphone. There are also trading statements from distribution firm Bunzl and oilfield services company Petrofac.
By Arvind Bhunjun; [email protected]
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