(Alliance News) - The FTSE 100 index in London was outperforming European peers, bouncing back from morning losses by Tuesday midday, as equity market participants shook off the growing risk of a no-deal Brexit and the shrinking prospect of a pre-election economic stimulus agreement in the US.
International Consolidated Airlines Group, boosted by news of a Covid-19 testing facility at London's Heathrow airport, and Reckitt Benckiser, which enjoyed a bumper third-quarter, were among those helping to lift the index of large-cap stocks.
The FTSE 100 was down 15.27 points, or 0.3%, at 5,899.92 midday Tuesday.
The mid-cap FTSE 250 index was down 69.35 points, or 0.4%, at 17,935.43. The AIM All-Share index, however, was down 0.1% at 973.82.
The Cboe UK 100 index was up 0.2% at 586.21. The Cboe 250 gained 0.5% at 15,166.87, and the Cboe Small Companies grew 0.1% to 9,403.10.
In mainland Europe, the CAC 40 index in Paris was marginally lower and the DAX 30 in Frankfurt was down 0.5%.
"Mildly positive sentiment" crept into equities on Tuesday, CMC Markets analyst David Madden said, though he explained there was little to be "cheery about".
"Equity markets in Europe are broadly a little higher this morning as there has been a slight rebound in sentiment," Madden said.
"Politics is in play too, both in terms of the UK-EU situation and the proposed US stimulus package. Dealers are growing weary of both sets of political discussions as there are a lot of talks, but not much progress and the same old lines about cautious optimism are being wheeled out. The lack of major political news on either front is feeding into the muted mood."
The US is heading towards a Tuesday deadline set by House Speaker Nancy Pelosi to agree a deal on a stimulus package. US President Donald Trump has previously urged his Republican Party to offer more than the USD1.8 trillion they have put forward, adding that he would be willing to go higher than the Democrats' USD2.2 trillion proposal.
In the UK, Prime Minister Boris Johnson will tell business to step up preparations for the end of the Brexit transition after Downing Street refused to resume talks with the EU.
With just 10 weeks until the transition finishes, Johnson and the senior Cabinet minister, Michael Gove, will use a conference call on Tuesday to tell business leaders they should be ready for major change regardless of whether there is a deal with Brussels.
"With a backdrop of US elections, Brexit trade talks and expectations for tougher lockdown conditions again, it's no wonder that markets are acting like a seesaw," AJ Bell Investment Director Russ Mould commented.
"Markets are overreacting to every data point, news update or speculation, meaning that prices are swinging up and down."
The pound was quoted at USD1.2962 around midday Tuesday in London, down from USD1.3000 at the London equities close on Monday.
Elsewhere in currencies, the euro stood at USD1.1811 midday Tuesday, improved from USD1.1785 at the European equities close Monday.
Against the yen, the dollar was trading at JPY105.54, firm from JPY105.45 late Monday.
IAG climbed 5.9%, the best performing large-cap stock. A pre-departure rapid Covid-19 testing facility has been launched at Heathrow Airport in London.
From Tuesday, the facilities in Terminals 2 and 5 will initially offer tests to passengers travelling to Hong Kong and Italy before they fly. To start, the facilities will offer LAMP testing and will expand to offer antigen testing in the coming weeks.
Heathrow Airport is a crucial transport hub for both London and IAG's British Airways, the UK's flag carrier. IAG shares remain down 75% so far in 2020.
Budget carrier easyJet rose 4.3% Tuesday, and Irish airline Ryanair was up 2.4%.
Broker Peel Hunt cast doubt on the new testing measures, however. Taking issue with its "prohibitively high" GBP80 cost, compared to the EUR10 charge taken on arrival in Italy.
"We are also concerned that these rapid tests are likely to be significantly less accurate than the PCR tests with 3-4% false positives. An error rate this high would mean 6-8 passengers were wrongly denied boarding on an average short haul flight, which if they were travelling as part of a family, would result in 6-8 passenger groups not being able to travel," Peel Hunt added.
Disinfectant maker Reckitt rose 1.6%. It posted a 6.9% third-quarter sales rise to GBP3.51 billion, helped by higher demand for its Lysol, Finish, Air Wick and Dettol cleaning products.
The household goods firm has seen demand for its disinfectants rise due to the Covid-19 pandemic. Reckitt said it is on track for "low double-digit like-for-like net revenue growth for the full year" and annual cost savings are at GBP300 million, "ahead of plan".
Intercontinental Hotels Group - the operator of the Holiday Inn brand - and Premier Inn-owner Whitbread rose 2.7% and 2.2%, respectively.
JPMorgan raised the hospitality duo to Neutral from Underweight.
Next grew 3.2% after Goldman Sachs raised the high-street clothing and homewares retailer to Neutral from Sell.
In the FTSE 250 index, Vesuvius, rose 5.3% after the metal flow engineering company reinstated dividend payments, starting with a 3.1 pence per share interim payout, down 50% annually.
Britvic was up 6.1% after the soft drinks maker landed a 20-year franchise bottling agreement with the US's PepsiCo and said financial 2020 adjusted earnings before interest and tax will be "slightly" ahead of current market estimates due to better-than-expected trading in the peak summer period.
At the other end of the mid-caps, train and coach booking platform Trainline shed 13%, bottom of the pile, after reporting an upcoming chief executive change.
Clare Gilmartin will round off a seven-year stint in the post in February, though she will remain with the company as a senior advisor. Chief Operating Officer Jody Ford will succeed Gilmartin as CEO.
Investor focus now will be back on the US third-quarter earnings calendar, with reports from Malboro cigarette maker Philip Morris International due before the market open and later in the day from streaming giant Netflix.
Ahead of the releases, US futures were higher. The Dow Jones Industrial Average is called 0.5% higher. The S&P 500 is called up 0.6% and the Nasdaq Composite is set to open 0.7% higher.
Brent fetched at USD42.76 a barrel on Tuesday morning, down from USD42.92.
"Oil prices slid for the fourth consecutive day, and even as OPEC promises to be proactive, oil prices remain perilously perched, tottering on the Covid curve as a pre-election US stimulus package remains in doubt. Progress on the US stimulus measures and news on the coronavirus will set oil's tone in the next few weeks," AxiCorp analyst Stephen Innes explained.
An ounce of gold was priced at USD1,905.48, down from USD1,908.70.
By Eric Cunha; ericcunha@alliancenews.com
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