(Alliance News) - Stock prices in London opened higher on Tuesday after European leaders reached a historical deal to help member states tackle the economic downturn after days of fractious negotiations, amid encouraging results from trials of potential Covid-19 vaccines.
In London, the FTSE 100 index was up 20.11 points, or 0.3%, at 6,281.63. The mid-cap FTSE 250 index was up 152.44 points, or 0.9%, at 17,538.29. The AIM All-Share index was up 0.3% at 888.53.
The Cboe UK 100 index was up 0.3% at 625.68. The Cboe 250 was up 0.1% at 14,825.10, and the Cboe Small Companies was up 0.1% at 9,148.11.
In mainland Europe, the CAC 40 in Paris was up 0.7%, while the DAX 30 in Frankfurt was up 1.0%.
"A combination of vaccine optimism and fiscal stimulus is boosting the mood in the market on Tuesday. Encouraging results from Oxford's vaccine candidate, in addition to EU leaders agreeing to a EUR750 billion Recovery Fund is overshadowing rising tension between the UK and China and soaring covid numbers in California," City Index analyst Fiona Cincotta said.
EU leaders on Tuesday approved a landmark stimulus package to fight the destructive aftershocks of the coronavirus outbreak that has sunk Europe into its deepest recession in history.
The euro stood at USD1.1440 Tuesday morning, flat from USD1.1441 at the European equities close Monday.
The EUR750 billion deal was sealed after four days and nights of intense negotiation that saw threats of walkouts and fierce resistance by the Netherlands.
"Deal!" tweeted EU Council Chief Charles Michel, whose job was to guide the tortuous talks over more than 90 hours.
The package, seen by AFP, was made possible by the crucial backing of Germany and France and includes the biggest-ever joint borrowing by the 27 members of the bloc, something that had been resisted by Berlin for generations.
Crucially, support from the so-called 'frugals four' - Austria, Denmark, Sweden and the Netherlands - was secured by a sizeable boost to budget rebates they receive on their budget contributions.
Overall, the deal will dole out EUR390 billion in the form of grants to pandemic-hit countries. That was lower than an original EUR500 billion proposal made by France and Germany. Another EUR360 billion will be disbursed in loans, repayable by the member state. The rescue package was agreed along with the EU's long-term budget, bringing the agreed spending to EUR1.8 trillion through 2027.
Analysts at ING commented "A marathon negotiation has resulted in an agreement on the EU budget and recovery fund. It is a significant step of solidarity and integration, but the hard-fought negotiations show that this provides no guarantees for unity moving forward and it is unclear how much political porcelain has been smashed for good.
"One thing is for sure, after the ECB has been the only game in town for quite some time now, it looks like a second team has entered the game. That should take some of the pressure off of the ECB in the aftermath of this historical crisis. Probably even more if the second team was to improve its team play."
In the FTSE 100, gold miners Fresnillo and Polymetal International were up 2.0% and 1.6%, respectively, tracking spot gold prices higher. The precious metal was quoted at USD1,823.70 an ounce Tuesday morning, up from USD1,816.37 at the London equities close Monday.
"There is no doubt that there is strong demand among investors for safe-haven assets despite the rally in the US stock markets. The on-going geopolitical tension between the US and China is serving a major cause of concern. The UK has also escalated tensions with China at a time when it needs Beijing's help the most because of Brexit. The UK's stance towards Hong Kong over a national security law is likely to cost the UK in the long run. Traders believe that the shinning metal is their best bet in times like this," said AvaTrade analyst Naeem Aslam.
At the other end of the large-cap index, GVC Holdings was the worst performer, down 7.5% after the UK HM Revenue & Customs decided to extend its investigation into the gaming company's former Turkish-facing online gambling business.
The Ladbrokes owner disposed of its Turkish business in December 2017.
When first informed of the probe by the UK tax collector in November 2019, GVC said it understood the investigation was aimed at former third-party suppliers and related to the processing of payments for online gambling in Turkey.
GVC said that UK tax collector HMRC on Monday informed subsidiary GVC Holdings (UK) Ltd that it was widening the scope of its investigation and is now examining "potential corporate offending" by an entity within GVC, which HMRC has not yet identified. GVC added that it continues to co-operate fully with HMRC regarding the provision of information.
BHP Group was down 0.5% after the Anglo-Australian miner said annual petroleum production was marginally short of guidance, with lower gas demand due to Covid-19.
As the company had to temporarily suspend operations at Antamina and Cerrejon during the year, production for both was below guidance although the two operations are now ramping back up.
Petroleum production for its financial year ended June 30 was 109 million barrels of oil equivalent, a 10% drop from 2019. Guidance was for the bottom end of between 110 million and 116 million barrels of oil equivalent. Copper production was 2% ahead of 2019, at 1.7 million tonnes. The company placed its copper production guidance under review in April but managed to meet the pre-review level of between 1.7 million and 1.8 million tonnes.
In London, the pound was quoted at USD1.2710 Tuesday morning, up sharply from USD1.2644 at the London equities close Monday.
UK Prime Minister Boris Johnson will assemble his Cabinet in person for the first time in four months on Tuesday as the government presses ahead with plans to secure millions of doses of a potential Covid-19 vaccine.
It comes after a study suggested a Covid-19 vaccine being developed by the University of Oxford and AstraZeneca was safe and induces an immune reaction, which was branded "encouraging" by the scientific community.
On Monday, Astra said the much-anticipated findings from the trial showed that a single dose of AZD1222 resulted in a four-fold increase in antibodies fighting SARS-CoV-2, the virus strain which causes Covid-19.
Astra noted that interim results from the ongoing phase 1/2 trial showed the vaccine "was tolerated and generated robust immune responses against the SARS-CoV-2 virus in all evaluated participants".
Overall, 91% of participants showed neutralising activity against SARS-CoV-2 a month after vaccination, with all participants given a second dose doing so. Late-stage phase 2/3 trials have begun.
Other vaccines are also in development by different companies, including the US's Pfizer.
UK Deputy Chief Medical Officer Jonathan Van-Tam commented in The Sun, saying he was "cautiously optimistic that by late next spring there will be several vaccines that will have made it. And my confidence is increasing."
Meanwhile, the UK and the EU resume talks on Tuesday, with the clock running down to a year-end deadline for a new post-Brexit deal to replace half a century of integration.
The latest round of negotiations takes place over three days in London, with a stalemate in key areas stoking fears of a no-deal scenario. Britain's chief negotiator David Frost and his EU counterpart Michel Barnier kicked off this week's talks with a joint dinner on Monday evening.
Their teams are set to discuss a host of issues, from fisheries and so-called level playing field rules on fair competition to law enforcement and judicial cooperation. Without a new agreement, the two sides would see ties reduced to minimum standards set by the World Trade Organization with high tariffs and serious disruptions to business.
Against the yen, the dollar was trading at JPY107.32, firm from JPY107.24 in London late Monday.
Brent oil was trading at USD43.36 a barrel, firm from USD43.00 at the London equities close Monday.
The Japanese Nikkei 225 index ended up 0.7%. In China, the Shanghai Composite ended up 0.2%, while the Hang Seng index in Hong Kong is up 1.6%.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
