(Alliance News) - The FTSE 100 was underperforming counterparts in Europe on Tuesday on account of a strong pound, with the currency volatile as the UK scrambles to get a Brexit agreement ahead of this week's EU summit.
The FTSE 100 stock index was 27.13 points lower, down 0.4%, at 7,186.32 Tuesday midday. However, the FTSE 250 was up 23.05 points, or 0.1%, at 19,952.95 and the AIM All-Share was down 0.2% at 868.75.
The Cboe UK 100 index was down 0.4% at 12,186.37. The Cboe UK 250 was 0.3% higher at 17,896.47 and the Cboe UK Small Companies up 0.2% at 10,999.95.
In mainland Europe, the CAC 40 in Paris and DAX 30 in Frankfurt were up 0.7% and 0.8% respectively in early afternoon trade.
"Market optimism is on the wane, as expectations of an imminent US-China trade deal fade after Friday's Trump-fuelled rally...Nevertheless, despite the lessened hope of an imminent trade deal, we are still seeing upside for European and US markets given the feeling that a partial deal can be struck," said Joshua Mahony, senior market analyst at IG.
"However, things are not as positive in the UK, where we have seen the FTSE 100 continue to underperform amid an elevated pound," he continued.
The pound was quoted at USD1.2641 at midday, up from USD1.2584 late Monday.
A Brexit deal could be clinched within days, according to the EU's chief negotiator who said reaching an agreement this week is "still possible".
The glimmer of hope comes as the UK government rejected claims that a deal cannot be negotiated in time for a crucial EU summit after the Finnish prime minister said "more time" is needed.
UK Prime Minister Boris Johnson is in a race against the clock to secure a fresh agreement for the meeting of European leaders starting in Brussels on Thursday.
Speaking on Tuesday morning as he arrived at the General Affairs Council, EU chief negotiator Michel Barnier said work to secure a deal has been "intense", after talks which are understood to have gone on until 11 pm on Monday.
The optimism coincided with Irish broadcaster RTE reporting that two sources confirmed that British negotiators will bring forward an updated plan on Tuesday to deal with the issue of customs and the Irish border.
"It seems unlikely that a deal will be agreed and drawn up in time for this week's meeting, yet the headway made over recent days does signal the possibility of another emergency meeting before the month-end deadline," said IG's Mahony.
In UK data on Tuesday, the country's unemployment rate edged higher in the three months to August, according to official figures.
The unemployment rate was 3.9% in the three months to August, slightly higher than the 3.8% seen in the three months to July. Market consensus expected the reading to hold steady at 3.8%.
UK average weekly earnings, both excluding and including bonuses, grew 3.8% on an annual basis in the three months to August. For the three months to July, average weekly earnings growth including bonuses was revised down to 3.9% from 4.0%. Excluding bonuses, earnings growth was revised up to 3.9% from 3.8%.
"Overall there is a hint of weakness here but it should be remembered that the labour market remains strong by historical standards. In terms of market reaction there was a small dip lower in the pound but it has since shrugged of the release with the markets far more concerned with the latest Brexit developments," said David Cheetham at XTB.
In London, domestically-exposed banks were higher on hopes of a Brexit deal and amid a stronger pound, with Royal Bank of Scotland up 2.8%, Lloyds Banking up 2.2% and Barclays gaining 1.8%.
In the FTSE 250, Hays was up 4.9% after reporting a "solid" first quarter.
For the three months ended September, net fees grew 1% on a reported basis and were flat on a like-for-like basis.
Growth was helped by strength in its largest segment, Rest of World - representing a third of total net fees - which was 7% higher on a reported basis and 4% up like-for-like. This was driven by "record" net fees levels in both the US and China as well as stable growth in Europe, the Middle East & Africa and "good" growth in the Americas and Asia.
At the bottom of the mid-caps was Vesuvius, down 13% after warning annual trading profit will be lower year-on-year due to a continued weakening in its key end markets.
The company, which supplies products to the steel and foundry industries, said that trading profit, or earnings before interest and taxes, for 2019 will be between GBP180 million and GBP190 million, down from GBP197.2 million recorded in the year ago period.
Elsewhere in London, Woodford Patient Capital was down 9.2% after Link Fund Solutions said it is to return cash to investors after winding up the LF Woodford Equity Income Fund.
Link has decided not to re-open the fund and will be winding it up "as soon as practicable", being January 2020. The LF Woodford Equity Income Fund also will drop the Woodford name and will be called LF Equity Income Fund.
Woodford Investment Management will cease with immediate effect to be the investment manager of LF Woodford Equity Income Fund. Woodford Investment Management also manages closed-ended Woodford Patient Capital, which repeated Tuesday it is reviewing its own management arrangements and will make an announcement "in due course".
At the beginning of June, stockpicker Neil Woodford took the decision to suspend withdrawals from the equity income fund due to "an increased level of redemptions", with the fund needing time to "reposition" its portfolio invested in unquoted and less liquid stocks into more liquid investments.
"While no mention is made of Woodford's other funds, it now seems highly unlikely that he will remain in place as manager of the Patient Capital investment trust, with the board already looking at potential replacements," commented Ryan Hughes, head of active portfolios at investment platform AJ Bell.
Indivior shares gained 7.4% as the drugmaker boosted its full-year guidance for a second time.
2019 revenue is now expected to be in the range of USD750 million to USD790 million after already having boosted revenue guidance in July to between USD670 million and USD720 million. Last year, Indivior reported revenue of USD1.01 billion, so the company is forecasting a decline of between 21% to 25%.
Net income guidance, before exceptional items and the effects of foreign exchange, was hiked to between USD160 million to USD190 million. This would represent a year-on-year fall of between 31% to 42% after posting net income of USD275 million last year. Indivior, however, previously predicted 2019 net income of between USD80 million and USD130 million.
In the US, Wall Steet is pointed to a higher open as banking earnings season kicks off. The Dow Jones, S&P 500 and Nasdaq are all called 0.5% higher.
On Tuesday there are third quarter results from JPMorgan Chase & Co, Goldman Sachs and Citigroup.
By Lucy Heming; lucyheming@alliancenews.com
London Midday is available to subscribers as an email newsletter. Contact info@alliancenews.com
Copyright 2019 Alliance News Limited. All Rights Reserved.
