11th Dec 2020 07:00
(Alliance News) - Stocks in London are called for a muted start Friday, with UK Prime Minister Boris Johnson warning there is a "strong possibility" that the UK will fail to broker a trade agreement with the EU as he ordered his cabinet to prepare for no-deal at the end of the Brexit transition period, which is in just 20 days.
The prime minister's warning came after his dinner with European Commission president Ursula von der Leyen in Brussels on Wednesday failed to produce a breakthrough.
IG futures indicate the FTSE 100 index is to open 1.44 points higher at 6,601.20 on Friday. The blue-chip index closed up 35.47 points, or 0.5%, at 6,599.76 Thursday.
At this level the FTSE 100 will have gained 0.8% over the past 5 days.
The pound was quoted at USD1.3319 Friday morning, up from USD1.3285 at the London equities close Thursday.
"It was another mixed session for European stocks yesterday, with the FTSE 100 outperforming on the back of a slightly weaker pound, but it was notable that we saw heavy falls in UK banks and other stocks with a domestic focus on no-deal Brexit concerns," CMC Markets analyst Michael Hewson said.
Johnson said the "deal on the table is really not at the moment right", saying it would leave the UK vulnerable to sanctions or tariffs if it did not follow the bloc's new laws.
He said the current proposals would keep the UK "kind of locked in the EU's orbit", but insisted negotiators would "go the extra mile" in trying to get a treaty in time for December 31.
But Johnson said he told his Cabinet on Thursday evening to "get on and make those preparations" for a departure without a deal in place, or in an "Australian relationship" as he puts it.
"I do think we need to be very, very clear, there is now a strong possibility - a strong possibility - that we will have a solution that is much more like an Australian relationship with the EU than a Canadian relationship with the EU," Johnson said.
CMC's Hewson continued: "The pound did come under pressure but overall, there still seems to be some optimism that pragmatism will prevail as the December 31 deadline gets closer, and the realisation slowly dawns of the potential economic damage that could ensue in the days after a no deal outcome. An outcome that in the current circumstances would simply heap economic pain on top of economic pain."
The euro was priced at USD1.2159, up from USD1.2119.
In the US on Thursday, Wall Street ended mixed, with the Dow Jones Industrial Average losing 0.2% and the S&P 500 down 0.1%, but the tech-heavy Nasdaq Composite advanced 0.5%.
In the US, weekly jobless claims increased by far more than expected.
The Department of Labor showed initial jobless claims for the week to December 5 came in at 853,000, up sharply from 716,000 the week before. Consensus expectations, according to FXStreet, had seen the reading edging up more modestly to 725,000.
The latest jobless claims reading was the highest since registering 873,000 in mid-September. This still pales in comparison to the high of 6.9 million reached in late March, however.
CMC's Hewson noted the jobless claims raise the prospect that the US economy is "now starting to see an acceleration in economic weakness". He continued: "The lack of a new stimulus deal starts to act as an anchor around the ankle of the economic recovery since April. All the while US coronavirus cases have continued to rise."
The Japanese Nikkei 225 index closed 0.4% lower on Friday. In China, the Shanghai Composite was down 1.2%, while the Hang Seng index in Hong Kong was up 0.3%.
Against the yen, the dollar was trading at JPY104.03, down from JPY104.38.
Brent oil was quoted at USD50.30 a barrel early Friday, pulled back from USD50.83 a barrel at the London equities close Thursday. The price of a barrel of Brent broke through the USD50 barrier for the first time in nine months on Thursday afternoon. Brent started the year trading around the USD66 level, rising to just over USD70 in early January before getting thumped by the Covid-19 pandemic.
Axi's Stephen Innes said the rise in oil price has been fuelled by an expected faster demand in recovery on vaccine hopes.
He continued: "An unwavering dip-buying strategy envelops markets as the combination of OPEC+ quotas, which are expected to keep the market floating on an even keel through the petulant northern hemisphere winter and improving road fuel demand is seen as rising faster than expected with the emergency vaccine deployments globally. And this is without a US stimulus package, which could offer yet another bounce to oil prices."
In downbeat vaccine news, France's Sanofi and Britain's GlaxoSmithKline said Friday their Covid-19 vaccines will not be ready until the end of 2021, after interim results showed a low immune response in older adults.
"Sanofi and GSK announce a delay in their adjuvanted recombinant protein-based Covid-19 vaccine programme to improve immune response in older adults," a statement said, adding that the vaccine's potential availability had been pushed back "from mid-2021 to the fourth quarter of 2021".
Gold was trading at USD1,835.50 an ounce, lower from USD1,836.95.
Friday's UK corporate calendar has a trading statement from jet engine maker Rolls-Royce and housebuilder Bellway.
In the economic calendar for Friday, there is German inflation at 0700 GMT and US producer prices at 1330 GMT.
By Paul McGowan; [email protected]
Copyright 2020 Alliance News Limited. All Rights Reserved.
Related Shares:
Glaxosmithkline