LONDON MARKET CLOSE: Lacklustre Trade As Political Uncertainty Looms

(Alliance News) - London had a tepid session on Tuesday as focus lay on politics ahead of crunch UK-EU Brexit trade deal talks and a looming US government shutdown deadline.

"How both these scenarios play out are likely to set the tone for the last few weeks of 2020 and the first part of 2021," said AJ Bell investment director Russ Mould.

The FTSE 100 index closed up 3.43 points, or 0.1%, at 6,558.82. The FTSE 250 ended down 59.24 points, or 0.3%, at 19,870.49, and the AIM All-Share closed up 0.66 points, or 0.1%, at 1,074.48.

The Cboe UK 100 ended up 0.1% at 653.98, the Cboe UK 250 closed down 0.5% at 17,166.28, and the Cboe Small Companies ended down 1.0% at 11,500.79.

In European equities on Tuesday, the CAC 40 in Paris slipped 0.2%, while the DAX 30 in Frankfurt ended up 0.1%.

Hopes were raised ahead of UK Prime Minister Boris Johnson and European Commission chief Ursula von der Leyen's meeting later this week after the UK and EU announced a pact to regulate complex arrangements for Northern Ireland after Brexit.

Cabinet Office minister Michael Gove and his counterpart Maros Sefcovic have been holding talks on the Withdrawal Agreement to resolve issues relating primarily to the Northern Ireland protocol. Their discussions are separate from the post-Brexit trade deal talks which remain deadlocked, but the agreement could improve relations between the two negotiating teams.

In a joint statement, the UK and EU said that "an agreement in principle" had been reached on all issues.

The agreement covers issues including border checks on animal and plant products, the supply of medicines and deliveries of chilled meats and other food products to supermarkets.

In view of these "mutually-agreed solutions", the UK government will withdraw clauses 44, 45 and 47 of the UK Internal Market Bill – which could have overridden the Withdrawal Agreement – and it will not introduce any similar provisions in the Taxation Bill.

Sterling shot off Tuesday's intraday lows on the news.

The pound was quoted at USD1.3360 at the London equities close Tuesday, higher compared to USD1.3346 at the close on Monday. Sterling was trading below the USD1.33 mark prior to the Northern Ireland agreement.

Fawad Razaqzada, market analyst at ThinkMarkets, said: "In short, this is potentially good news as it removes one of the stumbling blocks in the negotiations. But it remains to be seen whether the UK government will be able to secure a final trade deal with the EU given the vast differences on the issues of fisheries, governance and the "level playing field" remain."

Focus is now on a crunch meeting with UK Prime Minister Boris Johnson and European Commission chief Ursula von der Leyen later this week.

"With the probability of a deal rising on the back of Gove's announcement, the pound has bounced off its lows and it may go on to rise further," said Razaqzada. "It is worth watching the pound against the euro given that the European Central Bank will be keen to shoot down the single currency with its latest monetary policy decision on Thursday, when it is widely expected to announce an increase in its QE programme."

The euro stood at USD1.2111 at the European equities close Tuesday, soft against USD1.2137 at the same time on Monday.

Against the yen, the dollar strengthened to JPY104.14 compared to JPY103.94 late Monday.

Brent oil was quoted at USD48.98 a barrel at the London equities close Tuesday, down from USD49.04 late Monday. Safe haven gold was quoted at USD1,869.75 an ounce at the London equities close Tuesday, rising against USD1,865.82 at the close on Monday.

Stocks in New York were largely higher at the London equities close, with the Dow Jones up 0.3%, the S&P 500 index up 0.2%, and the Nasdaq Composite flat.

US Congress will pass a stopgap spending bill this week to prevent a government shutdown and allow for extended negotiations on next year's budget and long-awaited relief for Americans and businesses hammered by the coronavirus pandemic.

Funding for federal operations dries up late Friday, meaning the House and Senate must agree on either a new 2021 spending bill or a temporary fix known as a continuing resolution to keep the wheels of government spinning.

If they don't, many federal operations go into shutdown on December 12 even as the healthcare system is stretched to its limits, a scenario lawmakers from both parties have sought to avoid in extended budget negotiations that have yet to bear fruit.

In London, AstraZeneca shares rose 0.8% after it and Oxford University became the first Covid-19 vaccine makers to publish final-stage clinical trial results in a scientific journal, clearing a key hurdle in the global race to produce safe and effective drugs for the new coronavirus.

The study, published in the respected Lancet medical journal, confirmed that the vaccine works in an average of 70% of cases. The study showed the vaccine had an efficacy of 62% for those given two full doses, and of 90% in those given a half then a full dose.

AstraZeneca and Oxford faced questions last month about their analysis – which looks at data from a total of 23,000 people in separate trials with differing protocols – after releasing an overview of the results.

The Lancet publication came after Britain on Tuesday became the first country in the Western world to start immunisations, using a rival vaccine developed by Pfizer-BioNTech after approving it for general use last week.

A gaggle of blue-chip grocers ended the day in the green following the latest Kantar survey data.

Kantar said UK take-home grocery sales rose 11% in the 12 weeks to November 29, to total GBP27.67 billion, the fastest rate of growth since August. In the most recent four weeks sales increased by 14% - as eating and drinking out of home was restricted by the English national lockdown, noted Kantar.

More than 6 million households shopped at a grocer online in November - the highest ever - with digital platforms accounting for 14% of all sales - also a record.

Shares in online grocer Ocado ended up 2.7% on Tuesday, with sales growing by 38% in the 12 weeks to November 29. This period also fully covers the time since Ocado started selling Marks & Spencer Group products, during which its share of the chilled ready meals market has tripled to just over 3%.

Wm Morrison - shares closing up 1.7% - led the 'Big Four' grocers, with sales increasing both in store and online, resulting in growth of 14%, and gaining 0.2 percentage points of market share to stand at 10.3%.

J Sainsbury's share remained steady at 15.7%, with sales up by 11% in the latest 12 weeks, and the stock gained 2.1%. Tesco's sales rose by 10%, and shares ended slightly lower.

Ashtead rose 2.2% on an improved outlook.

The London-based global equipment rental company posted a pretax profit for the six months ended October 31 of GBP506.2 million, narrowing 23% from GBP660.2 million a year prior. Revenue dipped 6.1% to GBP2.30 billion from GBP2.45 billion the year before.

Ashtead said: "While trading volumes were lower than last year as a result of the pandemic, this has been mitigated, in part, by emergency response efforts throughout our business but particularly within our specialty businesses."

Current full-year guidance sees group revenue decreasing 3% to 7% from last year's GBP5.05 billion. Previous guidance saw revenue decreasing between 5% and 9%.

InterContinental Hotels Group closed down 3.6% after Jefferies cut the Holiday Inn hotel owner to Underperform from Hold. Meanwhile, FTSE 250-listed Virgin Money UK rose 4.2% after Liberum initiated the lender with a Buy rating.

The UK corporate calendar for Wednesday has trading statements from cigarette maker British American Tobacco and infrastructure construction firm Balfour Beatty, while transport operator Stagecoach puts out interim results.

In Wednesday's economic calendar, Chinese inflation is at 0130 GMT and Germany's trade balance at 0700 GMT.

By Lucy Heming; lucyheming@alliancenews.com

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