9th Dec 2020 12:18
(Alliance News) - Stock prices in London were continuing to push higher at midday on Wednesday, as UK Prime Minister Boris Johnson heads to Brussels to try to strike a last-gasp Brexit deal with European Commission President Ursula von der Leyen.
The dinner date between the two leaders comes as the UK and EU reached an agreement on border checks and trading rules for Northern Ireland. The discussions are separate from the trade talks, but the agreement could improve relations between the two sides.
The FTSE 100 index was up 22.60 points, or 0.3%, at 6,581.42. The mid-cap FTSE 250 index was up 100.06 points, or 0.6%, at 19,970.55. The AIM All-Share index was up 0.3% at 1,078.01.
The Cboe UK 100 index was up 0.3% at 655.75. The Cboe 250 was up 0.8% at 17,310.54. The Cboe Small Companies was up 0.3% at 11,539.00.
In mainland Europe, the CAC 40 in Paris was up 0.2% while the DAX 30 in Frankfurt was up 0.9%.
"Sentiment is positive ahead of the meeting between Prime Minister Johnson and the EU Commissioner Ursula von der Leyen. Volatility is likely to be low throughout the session as some traders will probably play the wait and see game. There are no guarantees that a deal will be reached but the UK’s decision to remove the controversial elements of the internal market bill, should greatly help with the issue surrounding Northern Ireland," said CMC Markets analyst David Madden.
"Cautious optimism is circulating as the IMB move should help build trust and in turn the talks should stand a better chance of resulting in a deal. Seeing as it is late in the game, traders are not holding out much hope for a very comprehensive deal, but a simple agreement would suffice as far as traders are concerned," Madden added.
The pound was quoted at USD1.3451 at midday on Wednesday, up from USD1.3360 at the London equities close Tuesday. Sterling was recovering from intraday lows of USD1.3355 in early trade, as investors continue to hold out hope for a Brexit deal.
Analysts at ActivTrades said: "After several days of weakness, the pound found support during the early part of Wednesday's session, recording gains versus both the euro and the dollar following encouraging developments as the EU and the UK reach the final stretch of their protracted negotiations. The last few days have been a roller-coaster for sterling, as brinkmanship from both sides pushed investors into starting to price-in higher chances of no deal, driving losses for the British currency.
"Over the last 24 hours the scenario changed again and sterling recovered the week's earlier losses, as the British removed the more controversial clauses from the UK Internal Market bill, a move seen by many as the waving of an olive branch to Brussels and the indication that London's preferred scenario is still to avoid walking away from the negotiations empty-handed."
The EU will have to give ground if there is to be any hope of a breakthrough in crunch talks between Johnson and von der Leyen, Michael Gove said. The senior Cabinet minister said Wednesday's meeting between offers the chance to "thrash out" the issues which still divide the two sides.
The pair's dinner in Brussels comes as time is running out to reach a trade deal before the current transitional arrangements expire at the end of the month.
There have been pessimistic briefings from both sides ahead of the face-to-face talks, with UK sources acknowledging "an agreement may not be possible" and the EU's negotiator, Michel Barnier, warning the bloc's foreign ministers that a no-deal scenario is more likely than an agreement.
Asked about Barnier's gloomy assessment, Gove said: "No, I don't think it is right to say that yet.
"I think that tonight there is an opportunity for the prime minister and Ursula von der Leyen, and they have a good relationship, to thrash out a potential way through."
In the FTSE 100, National Grid was up 2.5% after Citigroup upgraded the power lines operator to Buy from Neutral following regulatory clarity in the UK. On Tuesday, Ofgem said that it will not be cutting the amount electricity networks can give to shareholders by as much as originally planned.
At the other end of the large caps, gold miners Fresnillo and Polymetal International were the worst performers, down 1.9% and 1.2% respectively, tracking spot gold prices lower.
Gold was trading at USD1,860.02 an ounce Wednesday at midday, down from USD1,869.75 late Tuesday.
In the FTSE 250, Howden Joinery was the best performer, up 7.1% after the kitchens and joinery products company said it is expecting annual pretax profit to exceed the top end of current analyst forecasts by "around 10%".
Howdens said that since its November announcement, trading has stayed strong, with revenue from Howdens UK depots for November 1 to November 28 up 19% year-on-year and 17% on a same-depot basis. For the year to date, total UK revenue was 5.1% lower year-on-year. The company said its gross margin guidance remains unchanged and with its "continued recent strong trading performance".
Howdens is now expecting its pretax profit for its financial year ending December 2020 to be around 10% above the top end of current analyst forecasts. Howdens said the range of market expectations is GBP123 million to GBP152 million.
Vistry Group was up 5.5% after the housebuilder said it will consider reinstating its dividend this year, as it expects to deliver annual pretax profit at the top end of the guided range of GBP130 million to GBP140 million.
In November, Vistry confirmed its intention to resume dividend payments earlier than previously expected with an interim payment payable next November in respect of 2021, with a 2.5 times dividend cover and a progressive policy thereafter. However, given the strong performance and accelerated deleverage, Vistry said it will consider reinstating a "modest" final dividend for 2020.
Large-cap peers, Taylor Wimpey, Berkeley Group, Persimmon and Barratt Developments were up 3.1%, 3.0%, 2.5% and 1.8% respectively - in a positive read-across.
The euro was priced at USD1.2124, up from USD1.2111. Against the yen, the dollar was trading at JPY104.16, flat from JPY104.14.
"The USD has weakened across the board as investors seek riskier assets on improved risk appetite. The US dollar, alongside other safe havens, CHF, JPY and gold, have fallen on the renewed optimism that we are guiding our way out of the pandemic," said analysts at OFX.
Brent oil was quoted at a USD48.90 barrel Wednesday at midday, slightly lower from USD48.98 at the London equities close Tuesday.
US stock market futures were pointing to a higher open following yet another record-setting close for the S&P 500 and Nasdaq Composite indices on Tuesday, amid stimulus hopes.
The Dow Jones Industrial Average called up 0.3%, the S&P 500 up 0.2% and the Nasdaq Composite flat.
The White House unveiled a USD916 billion stimulus proposal on Tuesday in a final dash to break a months-long logjam over new aid for the coronavirus-stricken US economy before President Donald Trump leaves office in January.
US Treasury Secretary Steven Mnuchin announced the plan, which he said includes "money for state and local governments and robust liability protections for businesses, schools and universities. The new proposal is slightly larger than a USD908 billion compromise unveiled by a bipartisan group of senators last week.
By Arvind Bhunjun; [email protected]
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