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(Alliance News) - The FTSE 100 remained in the red at midday on Wednesday, the internationally-exposed index underperforming other UK and European stock measures as the pound strengthened on hopes of an eleventh hour UK-EU Brexit trade deal.
The FTSE 100 index was down 14.99 points, or 0.2%, at 6,438.17 on Wednesday. The more domestically focused FTSE 250 index was up 88.06 points, or 0.4%, at 20,038.78 and the AIM All-Share index was up 0.4% at 1,103.80.
The Cboe UK 100 index was down 0.2% at 611.07. The Cboe 250 was up 0.6% at 22,994.37, and the Cboe Small Companies up 0.6% at 15,074.98.
In mainland Europe, the CAC 40 in Paris was up 0.6% while the DAX 30 in Frankfurt was 0.7% higher in the afternoon.
"Stock markets in Europe are broadly building on yesterday's gains, even though the health crisis is still rumbling on, and there has yet to be a deal agreed between the UK and the EU. The FTSE 100 is basically flat on the day but that's because the firmer pound is holding back the index," said David Madden, market analyst at CMC Markets.
He added: "Fears for the new strain of Covid-19 have cooled for now, but I doubt we have heard the last of the new variant of the virus seeing as it has been identified in several other countries."
Europe on Wednesday began lifting travel bans on Britain put in place to contain a new fast-spreading Covid strain.
The new strain of the virus, which has also been detected in small numbers elsewhere, appears to spread more easily than other types but experts say there is no evidence it is more lethal or resistant to vaccines. The discovery unleashed panic that led to more than two dozen countries suspending UK flights, threatening travel chaos during the holiday season.
The most disruption was caused by France banning arrivals from the UK, leading to thousands of freight lorries being stranded in southern England. Travel to France can now resume, though a negative Covid-19 test will be required.
UK Communities Secretary Robert Jenrick warned it may take a "few days" to clear the backlog of around 4,000 lorries waiting to cross the Channel.
Sterling was quoted at USD1.3424 on Wednesday, jumping from USD1.3330 at the London equities close on Tuesday and reflecting renewed Brexit deal optimism.
Negotiators are continuing to talk in Brussels, while UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen are in close contact in an effort to resolve remaining difficulties.
Jenrick said he is "reasonably optimistic" that a late deal will be agreed before the current trading arrangements expire at the end of the month.
On Tuesday, the EU's lead negotiator, Michel Barnier, said they were making a "final push" to reach a deal and it was a "crucial moment".
Rabobank commented: "The hope is that this drawn-out process comes to an end sooner than later and that there'll be a deal before Christmas eve. In that case there should be just enough time left to get the legal and procedural work in order to allow for provisional application of the new treaty from January 1 onwards. Otherwise the EU and the UK would be really getting in uncharted territories."
The euro traded at USD1.2193, firming from USD1.2175 late Tuesday.
Against the yen, the dollar was quoted at JPY103.43, down from JPY103.70.
Gold was quoted at USD1,865.40 an ounce on Wednesday, slightly higher than USD1,862.00 on Tuesday. Brent oil was trading at USD50.14 a barrel , soft on USD50.22 late Tuesday.
The US is called for a higher start, with the Dow Jones and S&P 500 both pointed up 0.3% and the Nasdaq Composite up 0.2% as New York shakes off US President Donald Trump's abrupt rejection of Congress's economic stimulus package.
Trump brand the legislation "a disgrace", and called for a big increase in the proposed USD600 direct payments to less well-off Americans.
It came just a day after his Republicans and the rival Democrats finally agreed overwhelmingly to a USD900 billion bill meant to throw a lifeline to businesses and people struggling to keep heads above water, after months of wrangling over the package.
The economic events calendar on Wednesday has US jobless claims at 1330 GMT, brought forward a day due to Christmas Eve on Thursday.
In London, stocks sensitive to fluctuations in sterling, such as cigarette maker British American Tobacco and distiller Diageo, fell 1.1% and 1.0% respectively as the pound rose.
Whitbread rose 1.3% as The Times reported the owner of Premier Inn and the Beefeater and Brewers Fayre restaurant chains has asked its landlords for a 50% rent cut for the next three months as the travel & leisure sector remains under severe pressure from Covid-19.
Whitbread previously had paid its rent in full, unlike many peers, the newspaper noted. However, in a letter to its landlords seen by the Times, Whitbread asked for support, citing the tier restrictions in the UK and the cost of personal protective equipment.
A spokeswoman for Whitbread confirmed to the newspaper: "With government restrictions expected to result in subdued market demand into the first half of 2021, we are now asking our landlords to support us, as other stakeholders have during the pandemic, through a reduction in rent for the December quarter in recognition of the current environment."
In the FTSE 250, Cairn Energy surged 22%. Cairn won damages of USD1.2 billion after a tribunal ruled in the company's favour in a claim against the Indian government.
Cairn's claim was brought under the terms of the UK-India Bilateral Investment Treaty. The tribunal ruled unanimously that India had breached its obligations to Cairn under the treaty and has awarded Cairn damages of USD1.2 billion plus interest and costs, which now becomes payable.
The dispute between Cairn Energy and the Indian government stretches back to early 2014, when the Indian government froze Cairn Energy's 10% stake in Cairn India following the introduction of retrospective tax legislation.
Shares in N Brown rose 12% on its AIM debut, moving from London's the Main Market after in November saying the junior market was a more "appropriate environment" and better suited for a company of its size.
By Lucy Heming; lucyheming@alliancenews.com
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