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(Alliance News) - Stock prices in London were still mixed at midday on Thursday with the internationally exposed FTSE 100 index benefiting from weakness in the pound, as attention switches to the European Central Bank's interest rate decision early this afternoon.
The FTSE 100 index was up 31.74 points, or 0.4%, at 6,596.03. The mid-cap FTSE 250 index was down 34.76 points, or 0.2%, at 19,849.13. The AIM All-Share index was down 0.3% at 1,074.31.
The Cboe UK 100 index was up 0.4% at 657.05. The Cboe 250 was down 0.4% at 17,177.54. The Cboe Small Companies was flat at 11,489.99.
In mainland Europe, the CAC 40 in Paris was up 0.4%, while the DAX 30 in Frankfurt was up 0.1%.
CMC Markets analyst David Madden commented: "It has been a fairly quiet morning and broadly speaking equity markets are higher. Europe is dominating the headlines today as the UK-EU trade talks deadline has been pushed back to Sunday, the European Central Bank meeting will take place in over one hour, and today is the first day of the two-day EU summit. It wasn't a total shock that the meeting last night between the UK's Boris Johnson and Ursula von der Leyen - the president of the EU Commission - resulted in the deadline being knocked back.
"The situation has been dragging on for years, so what is a few more days? Divisions still remain and there isn't a huge amount of optimism doing the rounds, but seeing as there hasn't been a breakdown in discussions, hopes of a deal still linger."
The pound was quoted at USD1.3306 Thursday at midday, down sharply from USD1.3382 at the London equities close Wednesday, amid fears of a no-deal Brexit and disappointing UK economic data.
UK economic growth lost momentum in October against a backdrop of rising coronavirus cases, the Office for National Statistics said.
On a monthly basis, UK gross domestic product grew 0.4% in October, slowing sharply from 1.1% growth in September. The reading was in line with economist expectations.
The latest figure showed UK GDP expanded for the sixth month in a row but remained 7.9% smaller than its pre-pandemic size in February, the ONS said.
The UK economy looked to be on the road to recovery over the summer as lockdown measures were eased and the government rolled out support measures for the hospitality sector, such as the 'Eat Out to Help Out' scheme. The scheme proved so popular in August that many of London's restaurants took it upon themselves to continue offering the discount into September.
UK GDP expanded 10.2% from August to October, slowing from 15.5% in the three months to September.
However, analysts remain fearful the UK economy went into reverse in November and in the final quarter of 2020, due to the imposition of a second national lockdown in England last month to stem the spread of Covid-19.
"It's hard to keep pace with the rollercoaster of restrictions in the UK and consequently, the economic impact. With October seeing a host of tiered restrictions, the slowdown in GDP growth is to be expected. Fast forward to now, England has headed back into localised rules following the second national lockdown, which is inevitably likely to cause a contraction in November's data print as shops and restaurants once more closed their doors," Robert Alster, chief investment officer at Close Brothers Asset Management said.
In addition, Brexit deal uncertainty was putting pressure on sterling. UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen gave themselves until Sunday to decide on the future of post-Brexit negotiations, after a three-hour dinner left the two sides "far apart".
Johnson went to Brussels on Wednesday in a last gasp effort to salvage trade talks that are teetering towards failure, and the two leaders agreed that their negotiators should attempt one last push to bridge the divide.
"We had a lively and interesting discussion on the state of play across the list of outstanding issues," Von der Leyen said in a statement after the dinner at her Brussels' headquarters. "We gained a clear understanding of each other's positions. They remain far apart," she added.
The leaders agreed to further discussions by their negotiating teams "over the next few days" and that a "firm decision" should be taken by Sunday, a UK source said.
On the London Stock Exchange, DS Smith was the best blue-chip performer, up 3.0%. The packaging company said it delivered a resilient performance in the first half of its financial year despite a challenging environment and declared a shareholder payout in response.
For the six months to October 31, revenue was down 9.4% to GBP2.89 billion from GBP3.19 billion a year before, and pretax profit plunged to GBP97 million to GBP213 million.
DS Smith said that, over the half-year period, there was an initial further reduction in paper prices, as European corrugated demand fell during lockdowns and a temporary, but a sharp peak in old corrugated container prices.
However, old corrugated cases prices mostly normalised toward the end of the second quarter, and European paper prices are higher amid strong domestic demand.
DS Smith resumed dividend payments, declaring an interim payout of 4.0 pence after nothing the year before.
Croda International was up 2.5% after Berenberg raised the speciality chemicals firm to Buy from Hold.
At the other end of London large-caps, Ocado was the worst performer, down 5.7%. The online grocer posted a rise in revenue for Ocado Retail, as the joint venture with food and clothing retailer Marks & Spencer Group continued to benefit from the coronavirus pandemic. M&S was down 4.7%.
Ocado Retail posted a rise in fourth-quarter revenue, which it said reflected strong demand for online grocery during the recent lockdowns and other restrictions in the UK.
However, analysts were fearful about Ocado's prospects once the pandemic subsides, and the stock already has risen 72% in 2020.
For the 13 weeks to November 29, retail revenue rose 35% to GBP579.6 million from GBP429.7 million in the fourth quarter last year. Average orders per week were 360,000 during the period, up 3.0% from 350,000 last year. Of this, 130,000 orders per week were filled by the relatively new Erith customer fulfilment centre. Average order size was GBP133.
Ocado said customers are buying the full M&S range, with the biggest sellers coming from everyday essentials in the M&S fresh categories.
"Ocado Retail's ability to sustain sales growth will depend on enduring consumer behaviour. The risk is that an inoculated UK cuts Ocado's effective capacity by around 20%, and that the distribution of slots reverses to the much lumpier pre-Covid position," said analysts at Jefferies.
Aviva was down 2.5% after the stock went ex-dividend, meaning new buyers no longer qualify for the latest payout.
The euro was priced at USD1.2092, up from USD1.2080, ahead of the monetary policy decision from the European Central Bank at 1245 GMT. This will be followed by a press conference with President Christine Lagarde at 1330 GMT. The central bank is widely expected to keep interest rates unchanged and expand its stimulus programme.
"The ECB for its part is likely to top up the PEPP program but unless the central bank also decides to cut rates further the EURUSD is unlikely to see much downside as it continues to hold bid above the 1.2000 figure," said analysts at BK Asset Management.
Against the yen, the dollar was trading at JPY104.45, up from JPY104.27.
Brent oil was quoted at USD49.70 a barrel at midday on Thursday, higher than USD48.72 a barrel at the London equities close Wednesday. Gold was trading at USD1,836.78 an ounce, lower from USD1,849.10.
US stock market futures were pointing to a higher open as investors continued to assess progress on additional stimulus measures.
The Dow Jones Industrial Average is called up 0.2%, the S&P 500 up 0.1% and the Nasdaq Composite flat.
Hopes US lawmakers could be close to a breakthrough in deadlocked talks fuelled optimism after the White House proposed an economic rescue package that was bigger than a bipartisan plan put forward last week.
However, House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer showed little enthusiasm and the two sides remain stuck on Republican demands for liability protection for businesses and the funding for state and local governments, which is sought by Democrats.
Elsewhere, Facebook is likely to be in focus after US federal and state antitrust enforcers filed suit against the social media firm on Wednesday claiming it abused its dominant position with its acquisitions of messaging services Instagram and WhatsApp. The stock was down 0.9% in pre-market trade.
Separate suits filed by the Federal Trade Commission and a coalition of state officials called for the divestment of Instagram and WhatsApp, services which have billions of users and are part of the Facebook "family" of applications.
Facebook said it would offer a detailed response after reviewing the cases but added: "Years after the FTC cleared our acquisitions, the government now wants a do-over with no regard for the impact that precedent would have on the broader business community or the people who choose our products every day."
Facebook shares were down 1.0% in New York pre-market trade on Thursday, having lost 1.9% on Wednesday.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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