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(Alliance News) - The FTSE 100 got off to a cautious start on Wednesday after US President Donald Trump slammed Congress's economic stimulus package, while the pound strengthened once again on Brexit deal hopes.
The mid-cap FTSE 250 index, though, started on much stronger footing as shares in Cairn Energy surged more than 30%.
The FTSE 100 index was down 3.73 points, or 0.5%, at 6,449.43 early Wednesday. The FTSE 250 index was up 89.43 points, or 0.5%, 20,040.15. The AIM All-Share index was up 0.1% at 1,100.14.
The Cboe UK 100 index was down 0.1% at 612.19. The Cboe 250 was up 0.7% at 23,002.37, and the Cboe Small Companies up 0.1% at 14,997.27.
In mainland Europe, the CAC 40 in Paris was up 0.5% while the DAX 30 in Frankfurt was 0.6% higher early Wednesday.
Trump's overnight rejected a long-awaited stimulus bill from Congress, branding it a "disgrace".
Trump dropped the bombshell via a pre-recorded statement made in the White House and sent out on Twitter. It came just a day after his Republicans and the Democrats finally agreed overwhelmingly to a USD900 billion bill meant to throw a lifeline to businesses and people struggling to keep heads above water.
In his address, Trump said he would refuse to accept the bill as it is and demanded changes, notably a big increase in the proposed USD600 direct payments to less well-off Americans.
Trump has not yet received the bill and he did not explicitly say he would not sign. If he actually vetoed the package, Congress would almost certainly quickly override that, given the bipartisan support.
"A two-thirds majority vote in favour of the bill by both the Senate and the House of Representatives can override the presidential veto, if that is the course of action President Trump chooses. Overriding the veto is a relatively rare event in American politics though, and it threatens to add another layer over ambiguity as traders and investors prepared for the holiday season," said Jeffery Halley at Oanda.
Europe on Wednesday began lifting travel bans on Britain put in place to contain a new fast-spreading Covid strain while WHO experts were set to meet on a response to it.
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.
France was reopening cross-border travel with Britain on Wednesday but a negative Covid-19 test will be required. The ban on arrivals in France has led to long tailbacks of freight lorries in southern England and has disrupted passenger travel in the run-up to Christmas.
On the Brexit front, a UK Cabinet minister has indicated that hopes are rising for a trade deal although major differences still remain between the UK and EU.
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.
Cabinet minister Robert 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.
Sterling was quoted at USD1.3407 early Wednesday, rallying from USD1.3330 at the London equities close on Tuesday as the pound's volatile week continued, having traded above USD1.36 last week but dropping over the weekend.
"Currency markets continue to price in Brexit trade deal success. Failure, combined with low holiday liquidity, could make for emotional times ahead for Sterling long positioning," said Oanda's Halley.
The euro traded at USD1.2183 early Wednesday, firming from USD1.2175 late Tuesday.
In London, travel stocks rose after Europe eased travel bans on the UK. British Airways parent International Consolidated Airlines rose 2.8%, and easyJet was up 3.0% in opening dealings.
British Land shares rose 1.8% as it agreed the sale of a 75% interest in a portfolio of three buildings in London's West End to Allianz Real Estate acting on behalf of several Allianz group companies, for GBP401 million.
The transaction represents a blended net initial yield of 4.3%, a premium to September book value and is expected to complete in January.
The FTSE 100-listed property investor and developer will form a new joint venture with Allianz, with British Land's interest at 25% and Allianz's at 75%. British Land will continue to manage all three buildings and will receive an asset management fee.
Cairn Energy surged to the top of the FTSE 250, up 32% after winning USD1.2 billion in damages from the government of India.
The oil & gas exploration and development company'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 a retrospective tax legislation.
In Asia on Wednesday, the Japanese Nikkei 225 index closed up 0.3%. Against the yen, the dollar was quoted at JPY103.45, down from JPY103.70.
In China, the Shanghai Composite closed up 0.8%, while the Hang Seng index in Hong Kong closed up 0.9%. The S&P/ASX 200 in Sydney closed up 0.7%.
Gold was quoted at USD1,868.80 an ounce early Wednesday, slightly higher than USD1,862.00 on Tuesday. Brent oil was trading at USD49.86 a barrel early Wednesday, lower than USD50.22 late Tuesday.
The economic events calendar on Wednesday has US jobless claims at 1330 GMT.
By Lucy Heming; lucyheming@alliancenews.com
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