LONDON MARKET MIDDAY: FTSE 100 Flat As Pound Rises On Brexit Deal Hope

(Alliance News) - Stock prices in London were flat to higher at midday on Friday, with the FTSE 100 hindered by strength in the pound, which hit its highest level since July on optimism a Brexit deal can be reached before the October 31 deadline.

The FTSE 100 index was up 1.39 points, at 7,357.75. The internationally exposed index had sunk to an intraday low of 7,322.01 just after the market open. The FTSE 250 was up 84.85 points, or 0.4%, at 20,173.94. The AIM All-Share was up 0.32 points at 886.08.

The Cboe UK 100 index was down 0.1% at 12,478.01. The Cboe UK 250 was up 0.6% at 18,105.29, but the Cboe UK Small Companies 0.1% lower at 10,995.69.

In mainland Europe, the CAC 40 in Paris and DAX 30 in Frankfurt were up 0.4% and up 0.2%, respectively.

The pound was quoted at USD1.2520 at midday, up from USD1.2485 at the London equities close on Thursday. Sterling hit a high of USD1.2582 versus the greenback early Friday - its highest level since mid July.

"Among the risers housebuilders, DIY specialists and supermarket chains saw a healthy bounce after the pound hit the highest level in over two months," commented City Index analyst Fiona Cincotta, adding: "The EU seems keen to avoid a 'crash and burn' no deal Brexit which would have negative consequences not only for British companies but also for European firms which trade with them."

Brexit Secretary Stephen Barclay will meet with the EU's chief negotiator in Brussels after Jean-Claude Juncker insisted "we can have a deal" before the Halloween deadline.

Barclay will head to Brussels for talks with Michel Barnier on Friday following the European Commission president's warm words, which will have buoyed hopes on Downing Street.

Juncker said his meeting with UK Prime Minister Boris Johnson in Luxembourg on Monday was "rather positive" as he assured he was "doing everything to have a deal" to prevent a "catastrophic" no-deal Brexit.

Speaking to Sky News, Juncker said "we can have a deal", but was unable to put the chances at more than 50/50 when pressed.

In the FTSE 100, domestic-focused stocks such as housebuilders were among the risers, after the risk of a no-deal Brexit seemed to be reduced.

Persimmon was up 4.1%, Barratt Developments up 3.0%, Taylor Wimpey up 2.9% and Berkeley Group up 2.5%.

Royal Bank of Scotland was up 3.5% after the state-backed lender said Alison Rose will succeed Ross McEwan as chief executive officer. McEwan will formally step down on October 31.

RBS announced McEwan's departure in April. He will be joining National Australia Bank when his notice period is finished.

Rose - who will be the bank's first female boss - is currently deputy chief executive of Natwest Holdings, RBS's ring-fenced holding company. She will also be appointed as CEO on the boards of NatWest Holdings, The Royal Bank of Scotland, National Westminster Bank and Ulster Bank.

Her selection as RBS group chief executive was widely expected.

"One of the key challenges will be managing the transition back to full private ownership - a tricky task given the remaining 62% government stake. It is also worth considering that a potential Labour-led administration might look to keep the bank in public hands to use it as a vehicle to support domestic economic growth. Rose also faces a likely challenge from the economic fallout associated with Brexit, in particular the risk of a spike in bad debts," said AJ Bell's Russ Mould.

At the other end of the large-cap index, Rolls-Royce Holdings was the worst performer, down 2.8% after the jet engine maker warned fixing the Trent 1000 jet engines will take longer than expected.

As a result, the reduction in the number of grounded aircraft to less than 10 will now be delayed until the second quarter of 2020, Rolls-Royce added.

Rolls-Royce said it has accelerated intermediate pressure turbine blade replacement for a limited number of Trent engines. This resulted in additional engine removals, leading to further delays.

Rolls-Royce had to start a major Maintenance Repair & Overhaul programme due to faster-than-expected deterioration of the high-pressure turbine blade on the Trent 1000 TEN series of jet engines. The engines are used to power passenger aircraft such as the Boeing 787 Dreamliner.

Antofagasta was down 1.4% after UBS cut the Chilean copper miner to Sell from Neutral.

In the FTSE 250, Investec was the worst performer, down 6.5% after the Anglo-South African bank said first-half adjusted operating profit will be slightly behind the prior-year period due to challenging market conditions.

Investec attributed this to persistent uncertainty relating to Brexit, and depreciation of the South African rand against sterling.

Stocks in New York were set for a higher open, with US-China trade relations back on the agenda.

The DJIA was called up 0.2%, while the S&P 500 index and the Nasdaq Composite were both called up 0.3%.

Deputy-level trade negotiators from China and the US began in-person talks in Washington on Thursday as part of efforts by the world's two largest economies to resolve their protracted trade spat. The discussions, which are expected to continue on Friday, will be followed next month by a meeting of senior trade officials from both sides.

"For the first time in almost two months the US and China returned to the negotiating table, a tentative rapprochement paving the way towards real decision-makers' discussions scheduled for later in October. The sensitive subjects of intellectual property and forced transfer of technology are back on the agenda, the issues which were stumbling blocks in the past," Cincotta said.

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