(Alliance News) - Stock prices in London opened slightly lower on Monday, amid fears of an escalation in tensions between the UK and China, as investors also await developments from the EU leadership summit on the bloc's Covid-19 economic recovery plan.
The FTSE 100 index was down 30.81 points, or 0.5%, at 6,259.49. The mid-cap FTSE 250 index was 26.01 points, or 0.4%, lower at 17,321.92. The AIM All-Share index was up 3.91 points, or 0.4%, at 881.61.
The Cboe UK 100 index was down 0.5% at 623.54. The Cboe 250 was flat at 14,696.54, and the Cboe Small Companies index was flat at 9,152.06.
In mainland Europe, the CAC 40 in Paris was down 0.7%, while the DAX 30 in Frankfurt was 0.6% lower.
"UK -Chinese relations continue to deteriorate creating a downbeat tone. Dominic Raab has hinted that the UK will withdraw from the extradition treaty with Hong Kong, risking a wider fallout with China. The move comes as Huawei will be banned from the UK’s 5G network and among the possibility of sanctions over human rights violations. The Chinese ambassador to London said that the UK was bowing the US pressure," said City Index analyst Fiona Cincotta.
On the London Stock Exchange, AstraZeneca was the best blue-chip performer, up 2.5% as investors look ahead to results of Anglo-Swedish drugmaker's partnership with Oxford University to develop a coronavirus vaccine.
Results of the Oxford/AstraZeneca trial - which is now in its third phase of human trials in Brazil - are expected to be released on Monday, with high expectations over its efficacy.
At the other end of the large-cap index, Standard Life Aberdeen was down 2.8% after Barclays downgraded the fund manager to Underweight from Equal Weight.
British American Tobacco was down 2.0% after Jefferies cut the Dunhill, Kent and Lucky Strike cigarette maker to Hold from Buy.
GlaxoSmithKline was down 1.8%. The London-based pharmaceutical firm said it is to invest in German vaccine maker CureVac.
GlaxoSmithKline and CureVac announced the signing of a strategic collaboration agreement for the development of up to five mRNA-based vaccines and monoclonal antibodies targeting infectious disease pathogens. Under the terms of the deal, Glaxo will make an equity investment in CureVac of GBP130 million, representing close to a 10% stake, an upfront cash payment of GBP104 million.
EU leaders will resume their fractious summit on Monday to save the bloc's coronavirus aid plan, hoping to offset some of the economic destruction unleashed worldwide by the pandemic.
Europe remains the worst-hit continent, with more than 200,000 deaths, but there is a bitter dispute among EU nations on how to help its hardest hit - and most indebted - members such as Italy and Spain.
The euro was changing hands at USD1.1444 Monday morning, firm from USD1.1433 at the European equities close Friday.
EU summit host Charles Michel implored the bloc's bickering leaders to compromise on a huge economic rescue pack on Sunday as he battled to save a deadlocked summit.
In a bid to break the deadlock, Michel came up with a new proposal, which a diplomat said could be a "route to a deal".
"A plan with EUR390 billion in grants but smaller rebates for the Frugals" could work, a European official explained.
According to European officials, in response to the demands of a band of so-called "frugal" states led by the Netherlands, Michel offered to reduce the share of the rescue package that would be paid out as grants.
Cincotta said: "The EU leaders meeting is entering its third day with no deal on the EU Recovery Fund agreed. The fund aims to help those countries most affected by the coronavirus crisis, Italy and Spain. However, the Frugal Four - the Netherlands, Sweden, Denmark and Austria are opposed the deal in its current form. They want the Recovery Fund to be loan heavy with less emphasis on grants.
"The fact is that pushing heavily indebted countries such as Italy further into debt could not only come back to bite Italy but also the eurozone as a whole in a remake of the sovereign debt crisis. The opposing sides are reportedly close to agreeing and the euro remains elevated on such optimism."
The pound was quoted at USD1.2570 early Monday, up from USD1.2538 at the London close on Friday.
UK Foreign Secretary Dominic Raab is to set out further measures in response to China's imposition of a tough new national security law on Hong Kong amid growing tensions with Beijing.
The government looks set to follow the example of the US, Canada and Australia and suspend the UK's extradition treaty with the territory - a move that would infuriate China.
In a strong signal that he is ready to go down the same route, Raab confirmed at the weekend that he had completed a review of Britain's extradition arrangements as part of the next steps.
China was already smarting over the government's decision last week to exclude the tech giant Huawei from the UK's 5G network - reversing a decision in January allowing it a limited role. The Chinese ambassador to the UK, Liu Xiaoming, said Beijing was still evaluating its response to the Huawei ruling.
Against the yen, the dollar was trading at JPY107.25, firm from JPY107.11 Friday evening in London.
Brent oil was trading at USD42.84 a barrel Monday morning, down from USD43.08 at the London close Friday. Gold was quoted at USD1,809.11 an ounce, soft from USD1,810.20 an ounce.
The Japanese Nikkei 225 index closed up 0.1% on Monday. In China, the Shanghai Composite ended up 3.1%, while the Hang Seng index in Hong Kong is down 0.4.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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