(Alliance News) - The FTSE 100 continued to trade higher on Wednesday at midday, on course for a five-day winning streak amid a weaker pound and share price gains for educational publisher Pearson.
"Sterling continues to slide, surrendering its post-election gains, after the new Conservative government legislated to rule out an extension to the Brexit transition period which ends in a little over 12 months' time," commented AJ Bell investment director Russ Mould.
He added: "Weakness in the pound is helping to keep the FTSE 100, and its cohort of overseas earners, afloat after subdued trading in the US and Asia overnight."
The FTSE 100 index was up 13.76 points, or 0.2%, at 7,539.04. Other segments of the London market were mixed. The FTSE 250 was down 117.96 points, or 0.5%, at 21,572.24, and the AIM All-Share was up 0.3% at 930.59.
The Cboe UK 100 was up 0.2% at 12,775.98, the Cboe UK 250 was down 0.5%, at 19,475.07, and the Cboe Small Companies up 0.1% at 11,900.94.
The pound was quoted at USD1.3103 at midday Wednesday, down from USD1.3137 at the close on Tuesday.
Sterling has lost its recent gains after UK Prime Minister Boris Johnson - who last week won a comfortable majority in the UK general election - insisted he will not ask for another Brexit extension and is preparing legislation to forbid such a move.
The pound had spiked above the USD1.35 mark on Thursday last week as exit polls showed the Conservatives would win a sizeable majority in parliament. It dipped below USD1.31 earlier Wednesday.
Britain is due to leave the EU on January 31, but will remain in a transitional arrangement until the end of the year while negotiators debate future trade ties. European Commission chief Ursula von der Leyen warned Wednesday that failing to rapidly negotiate a new trade deal after Brexit would hurt Britain more than it would the EU.
Meanwhile, the pound received little support from UK inflation data a day ahead of the Bank of England's latest interest rate decision.
The consumer price index rose 1.5% year-on-year in November, stable on the inflation rate recorded for October. October's reading had been the lowest rate recorded since November 2016, when it was 1.2%.
Month-on-month, consumer prices rose 0.2% in November, reversing a 0.2% fall the month before.
Consensus, according to FXStreet, was for an annual inflation rate of 1.4% in November, and a monthly rate of 0.2%. The Bank of England targets a 2% inflation rate.
There was eurozone inflation released on Wednesday as well, with the rate accelerating to 1.0% in November.
Inflation had been 0.7% in October. The November figure was in line with market consensus, according to FXStreet. The inflation rate in November last year had been 1.9%.
The euro stood at USD1.1129 at midday Wednesday following the inflation data, down from USD1.1152 late Tuesday.
In European equities on Wednesday, the CAC 40 in Paris was up 0.1%, while the DAX 30 in Frankfurt was down 0.3%.
In the US on Wednesday, Wall Street is pointed to a slightly higher open, with the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all called up 0.1%.
Against the yen, the dollar was trading at JPY109.47 compared to JPY109.52 late Tuesday.
"The FX market has settled back into suffocating ranges. The yen and Swiss franc are among a handful of currencies to be up against the dollar this morning. Caution abounds," commented Kit Juckes at Societe Generale.
In commodities, Brent oil was quoted at USD65.80 a barrel midday Wednesday from USD65.92 late Tuesday. Gold was quoted at USD1,478.75 an ounce against USD1,476.00 at the close on Tuesday.
In London, Pearson was the top FTSE 100 gainer at midday on news of a share buyback, funded by a disposal.
The education publisher, up 3.0%, said it has agreed to sell its remaining 25% stake in Penguin Random House for USD675 million, part of which will be distributed to shareholders.
Pearson proposed a GBP350 million share buyback, which is expected to start in early 2020, it said. Shares repurchased will be cancelled.
In addition, the FTSE 100-listed publisher said Chief Executive John Fallon intends to retire in 2020, once a successor has been appointed. Pearson said it will consider both external and internal candidates.
Meanwhile, Rolls-Royce Holdings was up 1.6% after Panmure started the engine maker with a Hold rating.
NMC Health, which had seen shares rise more than 8% in early trading, fell back to be quoted 2.0% lower at midday as it hit back against "baseless" claims made by short seller Muddy Waters.
Muddy Waters, which was founded by short-seller Carson Block, on Tuesday said had taken a short position on NMC, explaining: "We have serious doubts about the company's financial statements, including its asset values, cash balance, reported profit, and reported debt levels."
Short selling is an investment or trading strategy that speculates on the decline in a stock.
NMC on Wednesday said it "understands" its regulatory disclosure obligations and "has nothing to add to disclosures already made". The company added that it has already responded to many of the allegations made in the report over the past 12 months.
"NMC will review the assertions, insinuations and accusations made in the report, which appear principally unfounded, baseless and misleading, containing many errors of fact, and will respond in detail in due course," the company said in a statement Wednesday.
Housebuilders including Persimmon, Berkeley and Barratt Developments were down 3.7%, 2.6% and 2.4% respectively after official data showed UK average house prices increased by 0.7% annually in October, the lowest growth since September 2012.
In the FTSE 250, Cairn Energy was 5.3% higher after Morgan Stanley raised the oil and gas firm to Overweight from Equal Weight.
Elsewhere in London, Staffline shares sank 25% after the recruitment firm said its performance has been below expectations so far in 2019.
Staffline said it expects to deliver adjusted operating profit - which excludes interest, tax and non-underlying charges - of between GBP10 million and GBP12 million for 2019. A year ago, the AIM-listed company generated underlying pretax profit - which excludes amortisation of intangible assets arising on business combinations and other exceptional costs - of GBP36.0 million.
Staffline explained that it has identified accounting errors in its 2018 results, relating to costs which were not correctly booked. The company said this had led to a GBP4 million overstatement of profit.
By division, Staffline said its Recruitment unit performed below its expectations so far in the fourth quarter of 2019, with lower-than-anticipated demand from end customers. During November, customer demand was down 16% year-on-year, the company noted, amid high levels of consumer uncertainty across the UK.
Whilst trading in December has improved, Staffline said, it is still below expectations.
By Lucy Heming; lucyheming@alliancenews.com
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