Footsie closes nearly 28 pts up
Pound still reacting to Johnson's hardline Brexit stance
Trump's impeachment vote in focus
5.15pm: FTSE 100 closes higher
FTSE 100 index finished in the green midweek, but FTSE 250 was lower as traders still fret about the prospect of a no-deal Brexit.
Footsie closed out nearly 28 points higher on the day at 7,553.
FTSE 250 lost around ten points at 21,680.
Over on Wall Street, stocks were ahead with the S&P 500 reaching another record high, and is within touching distance of its best year since 1997. The index added around three points to 3,195.
"Stocks market are mixed as the fear surrounding a no-deal Brexit is doing the rounds. 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," said David Madden, analyst at CMC Markets.
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.
Sterling fell 0.40% against the US dollar.
3.55pm: FTSE 100 driven higher by overseas earners
The FTSE 100 gained another few points as the pound remained underwater, serving overseas-earning blue chips well.
Hikma Pharmaceuticals (LON:HIK), Ashtead Group PLC (LON:AJT), Imperial Brands Group (LON:IMB) and Coca-Cola HBC AG (LON:CCH) were all on top of the Footsie’s leaderboard.
At the opposite end, Meggitt PLC (LON:MGGT) was the top faller as Panmure Gordon initiated coverage, slapping a ‘sell’ recommendation and 506p price target. Shares in the aerospace and defence components producer dropped 3% to 640.6p.
The big-cap index was up 20 points to 7,545, as cable dipped 0.4% to US$1.3082.
“Sterling has had a rather sharp comedown since its effervescent reaction to the UK election – now it is facing weeks (and months (and maybe years)) of more Brexit grind,” Spreadex’s Connor Campbell said in a note.
“There was a sense of weariness to the markets this Wednesday, caught between the election-slash-trade deal overstimulation of the last few sessions, and the awareness that the end of the year draws ever closer.”
2.50pm: Wall Street opens barely in the green
Wall Street stocks started on the front foot, though there was plenty in the political mix to pollute the mood.
The S&P 500 was up only 3 points to 3,195, the Dow Jones rose 36 points to 28,303 and the Nasdaq Composite gained 15 points to 8,838.
It did not come as a surprise for analysts, who were expecting a soft start ahead of what has been trending on Twitter among optimistic Democrats as #ImpeachmentDay.
London’s blue chips, meanwhile, were up 15 points to 7,540, while sterling trimmed its losses, down 0.3% to US$1.3078.
Here's video of Trump in 2014 saying what being impeached would do to Obama: "He would be a mess. He would be thinking about nothing but. It would be a horror show for him. It would be an absolute embarrassment. It would go down on his record permanently." pic.twitter.com/WctYjnjsP1
— andrew kaczynski???? (@KFILE) December 18, 2019
1.45pm: FTSE 100 flattening off
The FTSE 100 continued trimming its gains, even though the pound's post-election uptick has now been totally wiped out.
After last week's election, sterling bulls and many other people were hopeful an 80-seat majority would soften the Conservatives’ approach to Brexit.
“There are rather serious concerns [about Johnson's approach] and there has been nothing to alleviate those worries,” Connor Campbell, analyst at Spreadex, told Proactive.
However, he pointed out sterling is still at the same levels of early December, while now we are entering the notoriously quiet Christmas period, with a limited number of trading sessions left for 2019.
It is also a busy week for UK data, Campbell stressed, with UK retail and BoE meeting tomorrow and GDP figures on Friday.
“There are other things for the pound to focus on if it so wishes… but any Brexit headline is going to be the priority for the pound,” he added.
Indeed, European Commission president Ursula Von Der Leyen said not reaching an agreement by the end of next year would present another “cliff-edge” situation, that “will clearly harm our interests, but it will impact more on the UK”.
"In case we cannot conclude an agreement by the end of 2020 we will face again a cliff-edge situation."
Ursula Von Der Leyen, European Commission President claims that a no-deal Brexit would harm Britain more than the EU if a trade deal can't be agreed by the end of 2020. pic.twitter.com/51K0d7jNFl
— Channel 4 News (@Channel4News) December 18, 2019
London’s big caps were up 7 points to 7,531 while sterling was 0.5% lower at US$1.3063.
Bank stocks were not helping things after the Financial Conduct Authority (FCA) unleashed new rules on overdrafts as part of a wide-ranging shake-up of the market.
Shares in the big high street lenders were all in the red, though HSBC (LON:HSBA), the worst offender, was not. (Read more about the FCA overdraft shake-up here.)
Meanwhile, Lloyds (LON:LLOY), Barclays (LON:BARC) and Royal Bank of Scotland (LON:RBS) were also being touted as potential buyers of the Co-operative Bank, Sky News reported.
12.05pm: Soft open expected for Wall Street
The Footsie remains gingerly on the front foot and with votes on President Trump’s impeachment scheduled later, Wall Street is heading for a similarly soft open.
The House of Representatives will debate for up to six hours before making a verdict, which analysts expect to follow party lines, meaning Democrats will use their majority to impeach the President.
This is somewhat meaningless, however, as the Republican-controlled Senate is widely expected to simply reject it.
Analysts say the US focus on impeachment puts a question mark over the trade deal with China and its progress if Trump is removed from office.
“While many believe such an eventuality is unlikely, the surge of support for such a move is certainly grabbing the attention of markets that has thus far largely ignored proceedings,” stated Joshua Mahony, senior market analyst at IG.
Another worry for the markets, just as China concerns are dimming, is the US trade relationship with the EU.
US trade representative Robert Ligthizer said the president was ready to escalate its trade confrontation with the EU, with which the US has a “very unbalanced relationship” on trade.
Balancing news on the upside, a further shot in the arm came overnight as a US$1.4trn spending package was approved to avert a partial government shutdown.
11.15am: FTSE 100, pound in a holding pattern
The FTSE 100 and the pound were in a holding pattern after inflation data, as the market looked ahead at tomorrow’s Bank of England meeting and further to what next year may bring.
London’s benchmark was up 11 points to 7,536 while sterling was 0.2% lower at US$1.3104.
“We continue to expect the MPC to keep rates on hold at 0.75% on Thursday and for some time to come,” said Ruth Gregory, senior UK economist at Capital Economics.
Like some other City economists, Gregory expects no change in terms of interest rates for 2020, as she pointed to very weak price pressures, especially with yesterday’s robust labour market figures.
Namely, the annual rate of input price inflation was still close to October’s three-and-a-half year low, while output price inflation slipped further from 0.8% to 0.5% in November.
UK CPI readings remain below the BoE's 2% threshold but not really far enough to warrant rate cuts. OIS pricing shows v little chance of a move tomorrow from the Bank - also seen as unlikely in the coming months. One 25bps cut largely discounted by Nov 2020 pic.twitter.com/OznIo4J3sF
— David Cheetham, CFA (@DavidCheetham3) December 18, 2019
Looking ahead, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said CPI inflation is likely to rise over the next three months upon the anniversary of big falls in electricity, natural gas and motor fuel prices.
Tobacco inflation is also estimated to rebound in February, when the next budget is due to be held.
The headline rate is set to stay below 2% at least until the second half of 2020, given the likelihood of further falls in electricity and natural gas prices in April, when Ofgem will reset its price cap, and the impact of sterling’s recent appreciation of core goods inflation.
Tombs added the MPC may keep its focus on domestically-generated inflation, estimated to continue strengthening “modestly”, in response to the tight labour market and likely uptick in GDP growth in the first half of 2020.
“We continue to think, therefore, that investors are mistaken currently to be pricing-in a 50% chance that the MPC will cut bank rate in the first half of next year,” Tombs added.
10.15am: Inflation slightly higher than expected
The Footsie nudged higher as the pound pared losses after inflation came in slightly higher than expectations.
Big cap stocks were up 12 points to 7,537 while sterling was 0.1% lower at US$1.3117.
The consumer price index remained at 1.5% against a consensus forecast for a print of 1.4%, marking an upside after three consecutive readings showing lower than expected numbers.
The core reading of 1.7%, which excludes more volatile prices such as food and fuel, was unchanged from the previous month and, said XTB analyst David Cheetham, "is close enough to the Bank of England’s 2% target to not by itself give too much food for thought amongst ratesetters ahead of tomorrow’s decision.”
“After being widely criticised for becoming politicised following the bank’s comments on the EU referendum it would not be at all surprising if they decide that the best course of action is no action at all and simply stand pat until there’s great clarity on the Brexit outcome,” he added.
Among the movers, Persimmon PLC (LON:PSN) was down more than 2% after an independent review found the housebuilder's failure to meet minimum building standards was “a manifestation of poor culture” at the firm.
9.25am: pound goes back to square one
The FTSE 100 inched higher as the pound went back to square one as a reaction to PM Johnson’s hardline Brexit stance.
The blue chips gained 22 points to 7,547, while sterling dipped 0.25% to US$1.3098.
Analysts say the pound is signalling the risk created by Johnson’s move, which paves the way for a no-deal situation, while it is baffling from a technical perspective as Westminster can go back on it anytime should it be required.
“We should look at this for what it really is: legislation that can be overturned with a one-line bill at any stage should the need arise,” Neil Wilson, chief market analyst at Markets.com, said in a note.
According to Wilson, this is more of a political message to show new Tory leave voters that the campaign for 2024 has started, while showing the EU that a no-deal is always for the table.
After all, Johnson has already said he has little appetite for a no-deal.
“To be fair to Johnson, it worked last time, as he secured a last-minute exit deal that Parliament approved. And the caprice of the FX markets are not his concern or under his control,” Wilson added.
8.30am: NMC bounces, Pearson shares also in demand
The FTSE 100 made a marginally better than expected start to proceedings, though the subdued performance of Wall Street and Asia’s main markets provided little real direction for London’s price makers.
Traders were keeping their powder dry ahead of inflation figures later, which are expected to show prices are rising well below target.
While it is unlikely the latest batch of data pointing to an economic slowdown will influence the Bank of England’s interest rate decision on Thursday, it may set the scene for a cut to borrowing costs early in the New Year, analysts said.
If the mood was subdued on the equity markets, it was anything but in the foreign exchange arena where the pound continued to give up the gains made post-election.
The worry is the new Boris Johnson regime is happy to conclude a hard Brexit if it can’t negotiate a departure trade deal in the next year. Indeed, legislation being put before parliament means there will be no extension to negotiations beyond 2020.
There was a bounce-back for NMC Health (LON:NMC), the Gulf-based operator of health centres after its plunge on Tuesday prompted by a full-frontal attack by short-seller, Muddy Waters. The stock bounced 9.5%.
Also in demand were shares in Pearson (LON:PSON) after the publisher announced £530mln plans to sell its remaining 25% stake in the Penguin book group alongside a pledge to return the majority of that cash to investors. The shares advanced 3%.
Fears of the aforementioned hard Brexit put the skids under the housebuilders, with Barratt Developments (LON:BDEV) – off 2.7% - leading the Footsie losers’ list.
Proactive news headlines
W Resources PLC (LON:WRES) has raised US$5mln to provide extra working capital as its La Parrilla tungsten and tin mine in Spain is now fully up and running on a 24-hour basis.
Augmented and virtual reality investment fund Sure Ventures PLc (LON:SURE) got a boost from the rising value of entertainment pod group Immotion in its latest six months.
Open Orphan PLC (LON:ORPH) said its Venn Life Sciences arm is to provide a US firm with assistance in the filing a European Medicines Agency application for orphan drug designation for its product.
Salt Lake Potash Ltd (ASX:SO4) (LON:SO4) (FRA:W1D) (OTCMKTS:WHELF) has signed an agreement with leading fertiliser company HELM AG for the sale of premium sulphate of potash from its Lake Way Project.
Explorer Union Jack Oil PLC (LON:UJO) and natural resources investor Reabold Resources PLC (LON:RBD) provided separate updates on a Yorkshire onshore oil and gas fields that has all the hallmarks of a North Sea discovery in terms of its scale.
United Oil & Gas PLC (LON:UOG) says latest drill results from the assets in Egypt it will buy from Rockhopper Exploration PLC (LON:RKH) next year underline their quality.
Rainbow Rare Earths Limited (LON:RBW) says drilling at the Kiyenzi area of its Gakara project in Burundi contains “greater widths of mineralisation” than initially expected.
Rockfire Resources PLC (LON:ROCK) has hit high-grade gold during drilling at its Plateau gold deposit in Queensland, Australia.
Columbus Energy Resources PLC (LON:CERP) has drawn an additional US$1.5mln under a funding agreement with investment manager Lind Partners for the Saffron well in Trinidad.
Europa Metals Ltd (LON:EUZ) has revealed “very encouraging” grades of lead, zinc and silver from first metallurgical tests at its Toral project in north-west Spain.
Ncondezi Energy Limited (LON:NCCL) has tweaked the timetable to submit the data for the tariff agreement covering its coal-fired power station project in Tete, Mozambique.
Vast Resources PLC (LON:VAST) said it intends to unlock the first tranche of cash from a recent US$13.5mln bond financing deal before the end of the month.
5.48am: Subdued start predicted
The FTSE 100 is expected to open little changed, taking its cue from Wall Street and Asia where market activity was subdued.
All the action appears to be playing out on the foreign exchange markets with the pound giving up its election gains to trade at US$1.3099.
The jitters have been caused by a decision by the new Boris Johnson administration to add a clause to the Brexit bill to rule out any extension to the transition period beyond the end of next year.
Though trade deal negotiations are due to conclude by December 2020, a two-year additional time period is currently available by mutual agreement.
Of the key change, which makes a hard Brexit a distinct possibility, the BBC’s political editor Laura Kuenssberg said: “This is a political signal, a moment of early chest-beating too, designed to disappoint those who might have been hoping No 10 might slide to a softer Brexit over the next few months.
“And designed to gratify those who are adamant that Brexit must be completely "done" as soon as possible.”
Inflation eyed
Away from Westminster, the Square Mile will likely focus on the latest inflation data.
The ‘cost price’ (CPI) number is expected to remain at 1.5%, though some economists, such as those from RBC, expect the figure to drop to yet another three-year low of 1.4%.
If the prediction proves accurate and November brings signs of more slowdown, pressure may begin to rise on the Bank of England to cut interest rates.
As it stands, the consensus forecast is unanimous that the Monetary Policy Committee will keep borrowing costs unchanged Thursday.
Around the markets: Gold up 10 cents an ounce at US$1,480.70; Brent crude changing hands for US$65.81 a barrel, down 29 cents; Bitcoin US$6,658.77, off 3.3%
Wednesday’s major corporate and economic news
Finals: IntegraFin Holdings PLC (LON:IHP)
EGMs: Carpetright plc (LON:CPR), WH Smith PLC (LON:SMWH)
Economic data: UK inflation
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