Last checked at 
(Alliance News) - Stocks in London ended mixed on Thursday, with the FTSE 100 hindered by strength in the pound, which surged to multi-year highs as investors continue to hold out hope for a Brexit deal.
The internationally-exposed flagship index closed down 19.85 points, or 0.3%, at 6,551.06. The domestic-focused FTSE 250 ended up 199.48 points, or 1.0%, at 20,296.04. The AIM All-Share closed up 12.97 points, or 1.2%, at 1,095.00.
The Cboe UK 100 ended down 0.2% at 652.65, the Cboe UK 250 closed up 1.2% at 17,585.44, and the Cboe Small Companies ended up 0.6% at 11,473.43.
In Paris the CAC 40 ended flat, while the DAX 30 in Frankfurt ended 0.8% higher.
"Cable is now at its best price since 2018, potentially banking on the UK and EU hashing out their differences in the next 2 weeks. Cable's growth was enough to prevent the FTSE 100 from joining in with the session's gains, while helping send the UK midcaps up," said Spreadex analyst Connor Campbell.
The pound was quoted at USD1.3600 at the London equities close, up sharply from USD1.3500 at the close Wednesday, as investors reacted positively to upbeat Brexit headlines.
EU negotiator Michel Barnier told MEPs it would be "difficult but possible" to strike a post-Brexit trade deal with the UK by Friday, parliamentary sources told AFP.
Separately, political groups in the European Parliament warned Thursday that if they do not receive the text of a deal by Sunday they will not be able to ratify it before Britain leaves the EU's single market on December 31.
After briefing the heads of the European parliamentary groups, Barnier was due to sit down once again with his British counterpart David Frost to press on with talks.
But time is running short to find a trade pact. Britain leaves the EU single market in just two weeks after an 11-month post-Brexit transition. If there is no follow-on trade agreement, tariffs will be imposed on cross-Channel commerce, fuelling the economic disruption caused by London's departure.
Any trade deal reached by Barnier and Frost will have to be approved by the EU and UK parliaments, and special sessions may have to be held over the end-of-year holidays.
The UK parliament is to go into recess on Thursday, but a government spokesman said it could be recalled within 48 hours to endorse any deal. But MEPs in Brussels are concerned that they are running out of time to scrutinise the agreement.
Sterling hit a high of USD1.3624 versus the greenback in early trade - its highest level since late April 2018.
Axi's Stephen Innes commented: "Most observers now expect a Brexit deal announced either over the weekend or early next week just before Christmas. The fact that we have not heard much from the negotiators for a couple of days is seen as a good sign. And once fish is said to be the last hurdle, it means we are very close indeed.
"Traders will likely take some profit on their sterling longs once an agreement is confirmed. The question is whether real money will come in, particularly on the equity side, where positioning for a deal is arguably lighter, so with the Brexit agreement coming more into view, the market might be forced to reprice EU UK equity market risk higher and could boost the pound higher."
The pound took the Bank of England's latest monetary policy decision in its stride after the central bank kept interest rates unchanged earlier on Thursday.
The Bank of England's Monetary Policy Committee voted unanimously to keep the Bank Rate at 0.1%. The nine-strong committee also voted to maintain the total target stock of asset purchases at GBP895 billion.
Overall, the BoE said, the near-term UK outlook has evolved broadly in line with the MPC's expectations in its November Monetary Policy Report.
Gross domestic product growth in December is now expected to be weaker than forecast in November, with the economy expected to contract by a little over 1% in the fourth quarter, taking it to 11% below its level in the final three months of 2019.
Positively, the BoE noted vaccine progress, believing this should likely reduce downside risks facing the economic outlook.
Moreover, the pound found further support after UK Chancellor of the Exchequer Rishi Sunak announced the government's furlough scheme will be extended for another month.
Under the furlough scheme the government will continue to pay 80% of the salary of employees for hours not worked until the end of April. The scheme was due to expire at the end of March but the extension suggests the government believes the economy will still be struggling to cope with the damage caused by the coronavirus pandemic.
Sunak also extended government loan schemes until the end of March to help support businesses.
"With the UK expected to vaccinate roughly half the population by the end of Q1, Rishi Sunak's decision to extend the furlough scheme into April does provide a buffer as the UK attempts to restore business-as-usual. While the furlough scheme is an extreme measure designed to combat the effects of the pandemic, many will hope that the supportive measures enacted by the chancellor will also cushion the hard landing when we exit the EU in two weeks," said IG Group's Josh Mahony.
On the London Stock Exchange, WPP ended the best blue chip performer, up 4.2% after the ad agency set out plans to return to 2019 levels of revenue growth by 2022, after stumbling in 2020, while also unveiling a new dividend policy.
WPP said it intends to return the core Communications business to sustainable growth and is targeting annual cost savings of GBP600 million by 2025. Of these savings, WPP plans to invest two-thirds "in talent, incentives and technology" to drive growth.
The FTSE 100 constituent wants to supplement growth with "targeted, scalable" mergers and acquisitions of GBP200 million to GBP400 million annually. WPP said like-for-like revenue less pass-through costs fell 6.7% in the two months to November, with the result for 2020 expected to be in line with the year-to-date performance of an 8.4% decline.
WPP is aiming for a recovery to 2019 revenue less pass-through costs levels by 2022. The company expects 3% to 4% annual growth in revenue less pass-through costs from 2023 - including an annual benefit from M&A of around 0.5% to 1.0% - and will implement a new dividend policy, intending to grow this annually with a payout ratio of around 40% of headline earnings per share. The 2020 dividend will be in line with this new policy.
In addition, Bank of America raised the stock to Neutral from Underperform.
Rio Tinto closed up 1.0% after the Anglo-Australian miner announced the promotion of Chief Financial Officer Jakob Stausholm to chief executive officer, with effect on January 1. He will be replacing Jean-Sebastian Jacques, who it was announced in September would resign with effect at the end of March, or earlier should a successor be appointed before then. He will step down from his role as an executive director on January 1, the company said, and leave the group at the end of March.
Stausholm will be replacing Jean-Sebastian Jacques, who it was announced in September would resign with effect at the end of March.
At the other end of the large caps, Vodafone, closed down 4.1%, United Utilities, finished down 2.8% and British American Tobacco ended down 2.3%. The stocks went ex-dividend, meaning new buyers no longer qualify for the latest payout.
Meanwhile, the dollar was lower against major counterparts after the US Federal Reserve kept interest rates at historic lows on Wednesday.
The euro stood at USD1.2242 at the European equities close, up from USD1.2188 late Wednesday. Against the yen, the dollar was trading at JPY103.10, down from JPY103.52 late Wednesday.
The Federal Open Market Committee decided to keep the target range for the federal funds rate unchanged at 0.00% to 0.25%.
The FOMC said it expects to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to its target of 2.0% and is on track to moderately exceed 2.0% "for some time".
The low-rate environment will continue for some time, with policymakers backing rates to remain unchanged through 2023.
"The dollar remained weak in the post-Powell reaction while equities ended higher in Asia. Chair Jay Powell was as dovish as ever, noting that inflation was not a threat, that large fiscal deficits posed no problem given the low interest rates and that rates themselves were likely to remain near the zero bound for quite a long time," said analysts at BK Asset Management.
Stocks in New York were higher at the London equities close amid optimism over coronavirus vaccines and US stimulus talks, despite some concerning economic data.
The DJIA was up 0.4%, the S&P 500 index up 0.5% and the Nasdaq Composite up 0.6%. All three major stock benchmarks hit record intraday highs in early trade.
Regarding US stimulus, lawmakers said they were hopeful of passing a much-needed rescue package for the economy as they haggled over details of a bipartisan proposal that appeared to have broken months of deadlock.
With the two most contentious items removed from the plan, which is said to amount to around USD900 billion, Republican Senate Majority Leader Mitch McConnell said leaders "made major headway".
On the vaccine front, US experts were set to meet to decide whether to recommend approval of Moderna's Covid-19 vaccine, potentially paving the way for a second vaccine early next week after the Pfizer-BioNTech vaccine.
The major averages shrugged off a rise in US jobless claims, which increased a second straight week, the latest figures from the Department of Labor showed.
Seasonally adjusted initial claims rose to 885,000 for the week to December 12 from 862,000 the week before. Economists had expected the latest figure to edge down to 800,000.
The increase in initial claims comes as the US set a grim double record on Wednesday, registering more than 3,700 deaths from Covid-19 and over 250,000 new cases in 24 hours, according to figures from Johns Hopkins University.
Brent oil was quoted at USD51.45 a barrel at the equities close, up sharply from USD50.62 at the close Wednesday.
"Crude oil prices are also higher, hitting a nine-month high, with Brent over USD51 a barrel, as a weaker US dollar, and the prospect of a new US stimulus deal, along with a bigger than expected US inventory draw, helps to boost prices. While this is well off the lows of the year, to the tune of 170%, it is important to remember that Brent prices are still 25% lower on the year," explained CMC Markets analyst Michael Hewson.
Gold was quoted at USD1,888.75 an ounce at the London equities close, higher against USD1,857.15 late Wednesday.
The economic events calendar on Friday has UK retail sales figures and Germany producer prices at 0700 GMT.
The UK corporate calendar on Friday has interim results from doorstep lender Morses Club.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
