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(Alliance News) -Â London blue-chip stocks lagged European peers on Thursday at midday, hampered by a stronger pound amid rising expectations of an eleventh-hour post-Brexit trade deal.
The Bank of England on Thursday followed the US Federal Reserve in keeping interest rates on hold. The UK central bank said progress on vaccines has reduced the downside risk to its economic forecasts. It said it stands ready to take additional action should the UK inflation outlook weaken.
The pound was quoted at USD1.3616 after the BoE decision, higher than USD1.3500 at the London equities close on Wednesday. Sterling is now at its highest level against the dollar since May 2018.
The FTSE 100 index was down just 1.40 points at 6,569.51 on Thursday. The mid-cap FTSE 250 index was up 48.37 points, or 0.2%, at 20,144.93. The AIM All-Share index was up 0.6% at 1,088.63.
The Cboe UK 100 index was flat at 654.27. The Cboe 250 was up 0.5% at 17,449.77, and the Cboe Small Companies up 0.6% at 11,464.98.
The FTSE 100 was trailing stock index peers in mainland Europe. The CAC 40 in Paris was up 0.4%, while the DAX 30 in Frankfurt was up 0.8% Thursday afternoon.
"While European equity markets record strong gains the FTSE 100 has lagged behind, and indeed is struggling to hold its ground as a stronger pound puts pressure on the index," said Chris Beauchamp, chief market analyst at IG.
He said: "Markets overall are still in a positive frame of mind, managing to find the good news in an otherwise dull Fed statement and looking forward to some progress on a US stimulus deal, the major narrative behind this market bounce."
Congressional leaders said they were nearing a long-awaited agreement on a stimulus package for the pandemic-hit US economy, with top Senate Democrat Chuck Schumer describing the parties as "very close" to a deal.
"The case for fiscal policy right now is very strong. I think that is widely understood," Fed Chair Jerome Powell told reporters following the central bank's two-day policy meeting, noting the year-end expiration of expanded jobless benefits and eviction moratoriums.
Wall Street is headed for a higher open on Thursday, with the Dow Jones pointed up 0.4% and both the S&P 500 and Nasdaq set to gain 0.5%.
Market optimism this week also has come from UK-EU Brexit talks. EU negotiator Michel Barnier said Thursday that talks with Britain on a post-Brexit trade deal were progressing but that there had been no breakthrough.
"Good progress, but last stumbling blocks remain. We will only sign a deal protecting EU interests and principles," Barnier tweeted after meeting leading MEPs.
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.
"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," said Stephen Innes at Axi.
The euro traded at USD1.2238 early Thursday, higher than USD1.2188 late Wednesday. Against the yen, the dollar was quoted at JPY103.05, down from JPY103.52.
In London, ex-dividend stocks were dragging on the FTSE 100. Vodafone was down 2.9%, British American Tobacco down 2.6% and United Utilities down 2.5%, all going ex-dividend on Thursday.
At the top of the blue-chips was WPP, rising 4.4% as it set out plans to return to 2019 levels of revenue growth by 2022.
The advertising agency 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.
Polymetal was in second place in the FTSE 100, advancing 4.2% as the price of gold rose amid a weaker dollar. Precious metals mining peer Fresnillo rose 2.1%.
Gold was quoted at USD1,877.00 an ounce midday Thursday amid a weaker dollar, higher than USD1,857.15 on Wednesday. Brent oil was trading at USD51.22 a barrel, up from USD50.62 late Wednesday.
In the FTSE 250, Avon Rubber slumped 14% as the respiratory protection equipment manufacturer noted delays in the awarding of ballistic protection contracts within its Military business in the US.
Avon said that it had been awarded contracts for the US Defense Logistics Agency's enhanced small arms protective inserts and US Army's vital torso protection body-armour plates.
The group was in talk with the two US government customers to complete the necessary product approval processes, which was on-track to be completed in the first half of its 2021 financial year. However, due to a failure encountered in first article testing, the approval process has been delayed.
Now Avon expects first deliveries under the two contracts to start in the first half of its 2022 financial year.
SSP fell 2.3% as it swung to full-year loss in a pandemic-battered few months for the global travel market.
The London-based operator of food and beverage outlets in travel locations reported its revenue for the financial year ended September 30 decreased 49% to GBP1.43 billion from GBP2.79 billion the year before. This resulted in a pretax loss of GBP425.8 million, turning from a profit of GBP197.2 million the year prior.
SSP said like-for-like sales were down 51% in the year, noting that this was due to the coronavirus pandemic, which caused the closure of most global travel markets since March.
The company reported "very low sales" in the third quarter, down 93% year-on-year, but saw passenger numbers increase gradually over the final quarter, to see sales 76% lower year-on-year by the end of September. However, the re-emergence of the virus and further lockdowns across the UK and Europe since the end of the financial year has resulted in further volatility in passenger numbers, said SSP.
The data calendar on Thursday has US jobless claims figures at 1330 GMT.
By Lucy Heming;Â lucyheming@alliancenews.com
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