LONDON MARKET MIDDAY: FTSE 100 Rises As Pound Falls To Three-Month Low

Mon, 07th Dec 2020 12:38

(Alliance News) - Stock prices in London were mixed at midday on Monday, with the FTSE 100 boosted by a Brexit-hit pound, while the US looks poised to sanction more Chinese officials in response to Beijing's crackdown on Hong Kong.

Michel Barnier is said to have given a "downbeat" and "gloomy" assessment of progress in reaching a post-Brexit trade deal between the EU and UK following a weekend of tense talks.

The EU's chief negotiator updated ambassadors from the 27 member states on the state of play on Monday morning ahead of a resumption of discussions in Brussels with his UK counterpart, David Frost.

Irish Foreign Minister Simon Coveney told RTE news: "Having heard from Michel Barnier this morning, really the news is very downbeat. I would say he is very gloomy, and obviously very cautious about the ability to make progress today.

"There was news last night on some media sources that there was a breakthrough on fishing. That is absolutely not the case from what we're hearing this morning."

UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen will assess later whether a deal can be salvaged. The two leaders are set to speak on Monday evening - their second call in a little over 48 hours - after their top negotiators spent Sunday locked in detailed talks.

The FTSE 100 index was up 33.42 points, or 0.5%, at 6,583.65 midday Monday. The mid-cap FTSE 250 index was down 172.37 points, or 0.9%, at 20,010.32. The AIM All-Share index was up 0.3% at 1,071.70.

The Cboe UK 100 index was up 0.3% at 654.89. The Cboe 250 was down 1.1% at 17,295.54. The Cboe Small Companies down 0.1% at 11,711.50.

In mainland Europe, the CAC 40 in Paris was down 0.9% while the DAX 30 in Frankfurt was down 0.4%.

"Sterling is in the firing line because of the nerves surrounding the standoff, and that is the reason why the FTSE 100 is outperforming against its eurozone counterparts. International stocks like British American Tobacco, AstraZeneca, Unilever, Diageo and Imperial Brands are all helping the index. Those companies benefit from the slide in sterling as they earn a large portion of their revenue overseas," said CMC Markets analyst David Madden.

In the FTSE 100, British American Tobacco, Unilever, Diageo and Imperial Brands were up 4.5%, 0.5%, 1.9% and 2.7%, respectively.

AstraZeneca was up 2.0% after Morgan Stanley raised the Anglo-Swedish drugmaker to Overweight from Equal Weight.

The pound was quoted at USD1.3257 at midday on Monday, sharply lower from USD1.3470 at the London equities close Friday.

At the end of last week, sterling breached the USD1.35 mark, reaching its strongest level since May 2018 on hopes of a Brexit trade agreement. However, cable fell to its lowest level since early September on nervousness on whether a deal will be agreed.

"We think a UK-EU trade deal narrowly remains the most likely outcome of talks, but time is not on anyone's side. A deal would unlock some modest upside for sterling, but a lack of risk premium means there is potential for plenty more downside should talks end without an agreement," said analysts at ING.

At the other end of the large caps, housebuilders were the worst performers despite positive UK house price data.

Berkeley Group was down 7.5%, Persimmon down 6.5%, Barratt Developments down 5.3%, and Taylor Wimpey down 3.7%.

UK house prices rose in November, continuing to be supported by high mortgage approvals and strong demand, the latest figures from Halifax showed on Monday.

Annually, UK house prices in November were 7.6% higher than in the same month a year earlier - the strongest growth since June 2016. On a monthly basis, house prices in November were 1.2% higher than in October.

The average price for a house was GBP253,243 in November. Halifax noted the average property price has risen by more than GBP15,000 since June, which in percentage terms equates to 6.5% - the strongest five-monthly gain since 2004.

"UK housebuilders are on the back foot in early trade despite yet another reminder of just how much this recent stamp duty holiday has helped to lift the sector throughout the pandemic. The latest Halifax HPI release saw another 1.2% added to UK house prices in November, taking the annual change figure up to an impressive 7.6%. However, with Brexit talks faltering at such a critical time, the fear of a Brexit/stamp duty double whammy could see a very different story for 2021 house prices," said IG Group's Josh Mahony.

The FTSE 350 Household Goods & Home Construction sector was the worst-performing sector in London, down 2.6%.

HSBC was down 2.1% after Bank of America downgraded the China-focused lender to Underperform from Neutral.

Elsewhere in London, IMImobile was up 47% at 593.10 pence after the cloud communications software provider agreed to a takeover offer from Cisco Systems, valuing the AIM-listed firm at GBP543 million.

Cisco Systems is to pay 595p per share for IMImobile, valuing IMImobile's entire share capital at around GBP545 million on a fully diluted basis. Cisco so far has irrevocable undertakings or letters of intent to support the deal in respect of 44.9 million IMImobile shares, representing a controlling 54.5% stake.

In other M&A news, Countrywide was up 23% at 313.00p. Connells significantly raised its takeover offer for its fellow UK estate agency, while dismissing a rival proposal from Alchemy Partners.

Connells announced a firm cash offer for Countrywide at a price of 325 pence per share, which values the London Main Market listing's equity at GBP112.1 million and implies an enterprise value of GBP200.2 million including Countrywide's debt.

Connells said it decided to increase its previous proposed offer price by 30% after discussions with Countrywide's shareholders last week. It said the cash offer means shareholders would receive "immediate, certain and significant value at a 124% premium" to Countrywide's closing share price of 145.00p on November 6.

In response, Countrywide said Monday it will evaluate the merits of the Connells offer but urged shareholders to take no action in the meantime. Likewise, Alchemy said Monday it is considering its options, following the announcement by Connells.

The euro was priced at USD1.2109, down from USD1.2140. Against the Japanese yen, the dollar was trading at JPY104.22, flat from JPY104.20.

Brent oil was quoted at USD48.89 a barrel on Monday at midday, down from USD49.08 late Friday. Gold was trading at USD1,830.02 an ounce, slightly lower from USD1,832.24.

US stock market futures were pointed to a lower open, having set fresh record highs on Friday, amid brewing tensions between the US and China.

The Dow Jones Industrial Average was called down 0.4%, the S&P 500 down 0.4% and the Nasdaq Composite down 0.1%.

China's top diplomat on Monday called for the resumption of talks with the incoming US administration of President-elect Joe Biden, as relations between the world's two largest economies continued to nosedive.

Beijing and Washington have locked horns over issues from trade and China's human rights record to its expansionist ambitions in the South China Sea.

But speaking during a video call with the board of the US-China Business Council on Monday, foreign minister Wang Yi said "the two sides should work together."

"We need to strive to restart the dialogue, get back on the right track, and rebuild mutual trust in the next phase of China-US relations," he said, according to a readout of his remarks on the foreign ministry website.

His comments come days after Washington unveiled travel restrictions for members of the Chinese Communist Party over human rights abuses in the restive region of Xinjiang, as relations between the two tumble to the lowest point in decades.

More sanctions are expected this week, with Bloomberg reporting Monday that the US was set to slap at least a dozen officials with asset freezes over their role in the disqualification of pro-democracy lawmakers in Hong Kong.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com