LONDON MARKET CLOSE: FTSE 100 Boosted By Shaky Pound On Brexit Worries

(Alliance News) - London stocks rallied on Monday, shaking off further rises in coronavirus cases in China, with the FTSE 100 helped by a weaker pound on Brexit trade talk jitters.

This came after UK Prime Minister Boris Johnson said he would be prepared to walk away from the EU without a full trade deal.

The FTSE 100 index closed up 40.30 points, or 0.6%, at 7,326.31. The FTSE 250 ended up 17.36 points, or 0.1%, at 21,160.85, and the AIM All-Share closed just 0.39 of a point higher at 951.38.

The Cboe UK 100 ended up 0.7% at 12,428.62, the Cboe UK 250 closed up 0.1% at 19,166.71, and the Cboe Small Companies ended down 0.1% at 12,428.02.

In European equities on Monday, the CAC 40 in Paris ended up 0.5%, while the DAX 30 in Frankfurt ended 0.5% higher.

"In what could be the continuation of a familiar cycle, the US and European markets ignored the Shanghai Composite's plunge, and a sharp rise in the coronavirus death toll, to rebound on Monday," said Connor Campbell at Spreadex.

The new SARS-like virus has so far infected more than 17,000 people and killed over 360. The virus has spread to more than 24 countries despite many governments imposing unprecedented travel bans on people coming from China.

Despite the virus growing, European stocks were higher on Monday.

"The fact the People's Bank of China pumped a not-insignificant chunk of change into the financial system, alongside evidence the 'national team' of state-backed investors has been buying stocks, appeared to reassure Western investors," Campbell said.

Stocks in New York were also in the green at the London equities close, with the Dow Jones up 1.0%, the S&P 500 index also rising 1.0%, and the Nasdaq Composite up 1.3%.

In the US, there was some broadly upbeat manufacturing data on Monday.

The Institute for Supply Management's purchasing managers' index rose to 50.9 in January from 47.8 in December. Any reading below 50 indicates contraction in a sector, while one above expansion.

"The Phase One trade deal between the US and China has lifted much of the gloom hanging over the sector with businesses responding positively. Unfortunately, this may be a small window of good news as coronavirus concerns start to cloud the outlook," said ING.

IHS Markit, meanwhile, said its PMI fell to 51.9 in January from 52.4 in December. The score was improved on the flash figure of 51.7 though.

Meanwhile, some improved manufacturing data in the UK was unable to lift the pound.

The IHS Markit/CIPS manufacturing PMI came in at the neutral mark of 50.0 in January, up from December's figure of 47.5. The score was a nine-month high and also beat the flash estimate of 49.8.

However, traders were rattled after UK Prime Minister Boris Johnson and EU chief Brexit negotiator Michel Barnier set out competing visions of the future relationship.

The prime minister insisted there was "no need" to abide by EU rules and said that British fishing grounds are "first and foremost" for UK boats. But Barnier said that allowing European trawlers into British waters was "inextricably linked" to securing a trade deal.

Johnson used a speech in Greenwich to stress his commitment to free trade – and signal his determination to secure an arrangement with Brussels along the lines of that agreed between the EU and Canada.

He confirmed that if a Canada-style agreement was not possible, he would be prepared to walk away without a full trade deal, like Australia's relationship with the EU.

"Today's speech will remind pound traders that the future for the UK remains extremely uncertain," said Fiona Cincotta at City Index.

The pound was quoted at USD1.3008 at the London equities close Monday compared to USD1.3186 at the close on Friday.

The euro stood at USD1.1059 at the European equities close Monday against USD1.1083 at the same time on Friday. Against the yen, the dollar was trading at JPY108.63 compared to JPY108.40 late Friday.

In London, easyJet ended as the top performer in the FTSE 100 in a positive read-across from third-quarter results from fellow short-haul carrier Ryanair.

Ryanair, closing up 6.7%, swung to a third-quarter operating profit of EUR91.3 million, compared to a loss of EUR68.0 million for the same period a year before.

Total operating revenue in the third quarter was up 21% year on year to EUR1.91 billion from EUR1.58 billion. Traffic rose 6.2% to 35.9 million, while revenue per passenger grew 13%.

Ryanair continued to guide for profit after tax between EUR950 million and EUR1.05 billion for its current financial year, based on strong Christmas and New Year travel bookings. This guidance was upgraded in January.

easyJet shares closed up 3.8%.

Diageo ended 2.9% higher after Kepler Cheuvreux raised the distiller to Buy from Hold.

Oil majors were among the worst performers as the price of the commodity slipped, with both Royal Dutch Shell and BP shares losing ground. Shell 'A' shares closed down 1.5% and 'B' shares down 1.8%, while BP shed 0.9%.

Brent oil was quoted at USD54.90 a barrel at the London equities close Monday from USD56.86 late Friday.

"Oil prices will likely remain near the low USD50s until we see further signs that China will see some return to normalcy with oil consumption. Any extended cuts delivered by OPEC will likely deliver rallies that will get sold into. Oil prices will remain heavy until we see start to see some signs that the virus may be peaking," said Edward Moya, senior market analyst at Oanda.

Elsewhere in the commodity space, gold was quoted at USD1,576.67 an ounce at the London equities close Monday, lower against USD1,586.60 at the close on Friday.

Back in London, Future ended up 4.1% after saying it expects its annual results to be ahead of market expectations despite macroeconomic uncertainty.

In addition, the magazine publisher was rebounding after closing down 16% on Friday in the wake of a short seller report. ShadowFall on Friday said it had shorted the stock, saying Future "is little more than a collection of generally low quality, often distinct and shrinking assets which carries significant execution risk".

Drax Group rose 3.7% after Barclays raised the power generation company to Overweight from Equal Weight.

In Tuesday's corporate calendar, there are full-year results from oil major BP as well as software firm Micro Focus Intentional. Miner Glencore releases its fourth quarter production report and electrical products distributor Electrocomponents a trading statement.

In the economic calendar on Tuesday, there is a UK construction PMI at 0930 GMT and eurozone producer prices at 1000 GMT. US Factory orders are at 1500 GMT.

In addition, the latest UK grocery share figures are due from Kantar at 0800 GMT.

By Lucy Heming; lucyheming@alliancenews.com

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