(Alliance News) - A surge in the pound on hopes a Brexit deal will be reached before the EU summit later this week caused the FTSE 100 to end Tuesday's session in the red, despite share price gains for banks and housebuilders.
The FTSE 100 index closed just 1.81 points lower at 7,211.64. The FTSE 250, meanwhile, ended up 267.07 points, or 1.3%, at 20,196.97, and the AIM All-Share closed up 1.38 points, or 0.2%, at 871.83.
The Cboe UK 100 ended up 0.1% at 12,246.23, the Cboe UK 250 closed up 1.8% at 18,160.58, and the Cboe Small Companies ended up 0.8% at 11,066.33.
"A midnight deadline from Michel Barnier did nothing to dampen the sterling's optimism on Tuesday," said Connor Campbell at Spreadex.
"Yet to receive the legal text from the British side of the table, the EU's chief negotiator reportedly has said that if there isn't a major move by the end of today, then reaching a deal this week is unlikely," said Campbell. "However, that failed to shoot down the pound. If anything, the currency only got more hopeful as the day went on."
The pound was quoted at USD1.2739 at the London equities close Tuesday, significantly higher compared to USD1.2584 at the close on Monday.
The EU's chief negotiator Michel Barnier on Tuesday warned that he needs good intentions to turn into a legal document as Boris Johnson races against the clock to secure a fresh agreement for the meeting of European leaders starting in Brussels on Thursday.
Barnier, who said work to secure a deal has been "intense" after talks which are understood to have gone on until 11pm on Monday, has reportedly called on the UK to present a legal text by the end of Tuesday.
Asked if he recognises the deadline, the prime minister's official spokesman said: "We are working hard. The prime minister is aware of the time constraints that we are under."
Barnier struck a positive note after meeting Brexit Secretary Stephen Barclay at the General Affairs Council on Tuesday morning. Irish broadcaster RTE reported that two sources confirmed British negotiators will bring forward an updated plan on Tuesday to deal with the issue of customs and the Irish border.
Sterling hit a high of USD1.2800 in the afternoon on Brexit deal hopes, its best level in five months.
"The strength of these gains [for sterling] forced the FTSE into the red as its peers continued to blossom in light of a 'partial trade deal' between the US and China," said Spreadex's Campbell.
In European equities on Tuesday, the CAC 40 in Paris ended up 1.1%, while the DAX 30 in Frankfurt climbed 1.2%.
Stocks in New York were firmly in the green at the London equities close, with the Dow Jones up 1.0%, the S&P 500 index up 1.1%, and the Nasdaq Composite up 1.2%.
A downbeat assessment of the global economy from the International Monetary Fund did little to dent equities in Europe and the US on Tuesday.
The IMF warned that the global outlook is beset by risks, and urged policymakers to work to find resolutions to trade disputes, since there are limited tools to respond to a new crisis.
"With a synchronized slowdown and uncertain recovery, the global outlook remains precarious," International Monetary Fund chief economist Gita Gopinath said in her introduction to the latest forecasts.
The IMF for the past year has every three months cut projected growth for 2019 as trade conflicts worsened. In its latest World Economic Outlook it trimmed the estimate by another two-tenths, to 3.0%. The report also lowered the 2020 forecast by a tenth to 3.4%.
As third quarter earnings season kicks off, JPMorgan Chase & Co was 3.9% higher in New York after reporting a rise in quarterly net income.
For the three months ended September, net income widened 8.4% to USD9.08 billion from USD8.38 billion the year prior. This was after net revenue rose 8.1% to USD30.06 billion from USD27.82 billion a year before.
"JPMorgan Chase delivered record revenue this quarter, demonstrating broad-based strength and the resilience of our business model despite a more challenging interest rate backdrop," JPMorgan Chief Executive Officer Jamie Dimon said, referring to recent US interest rate cuts.
Meanwhile, Goldman Sachs dipped 1.4% after third quarter profit and revenue fell following a "mixed" operating environment for the US banking giant.
For the three months ended September, pretax profit narrowed 21% to USD2.42 billion from USD3.08 billion the year prior. This was after revenue fell 8.0% to USD7.32 billion from USD7.96 billion the year before.
Net income narrowed to USD6.55 billion from USD7.92 billion the year prior.
Turning to currencies, the euro stood at USD1.1036 at the European equities close Tuesday, firm against USD1.1022 at the same time on Monday.
Against the yen, the dollar was trading at JPY108.79, flat versus JPY108.44 late Monday.
And in commodities, Brent oil was quoted at USD59.38 a barrel at the London equities close Tuesday from USD58.98 late Monday.
Gold was quoted at USD1,481.99 an ounce at the London equities close Tuesday, down from USD1,491.04 at the close on Monday.
In London, domestically-exposed UK banks surged on hopes of a Brexit deal. Royal Bank of Scotland closed up 5.3% and Lloyds Banking up 5.6%.
UK housebuilders, again heavily exposed to the local economy, also benefited on Tuesday. Barratt Developments closed up 5.5% and Persimmon up 3.9%.
It was a less buoyant session for another housebuilder, however, with Bellway dipping 2.6%.
FTSE 250 constituent Bellway on Tuesday raised its annual dividend on increased profit and revenue following a solid operational performance, but warned on its operating margin for the new financial year.
For the financial year to the end of July, the housebuilder said pretax profit rose by 3.4% to GBP662.6 million from GBP641.1 million the year before, on revenue that grew by 8.6% to GBP3.21 billion from GBP2.96 billion.
The company noted that the one-off benefit to operating margins from the Nine Elms development in Battersea, south London will not be repeated in the current year. Combined with a lack of house price inflation and build-cost pressures, the reduction to the underlying operating margin for the current year will be "more pronounced".
The biggest mid-cap faller, however, was Vesuvius, sinking 17%.
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.
One of the index's gainers was recruitment firm Hays, finishing 9.0% higher after a solid first quarter.
For the three months ended September, net fees grew 1% on a reported and were flat on a life-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.
Elsewhere in London, Woodford Patient Capital shares slumped 8.6% 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.
Wednesday's corporate calendar has annual results from clothing retailer ASOS and a trading statement from private healthcare firm Mediclinic International, as well as an update from Barratt Developments. Later, at 2230 BST, there is a third quarter operations review from miner BHP Group.
In the economic calendar on Wednesday, UK inflation is due out at 0930 BST followed by the same data from the eurozone, along with the trade balance, at 1000 BST. In the US are retail sales at 1300 BST
By Lucy Heming; lucyheming@alliancenews.com
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Lloyds (LLOY)
Hays (HAS)
Bellway (BWY)
Barratt Developments (BDEV)
Persimmon (PSN)
Vesuvius (VSVS)