LONDON MARKET MIDDAY: Stocks Continue To Slide On Brexit Uncertainty

(Alliance News) - Stock prices in London were continuing to decline at midday on Tuesday with investors growing increasingly fearful a Brexit deal will not be reached as the end of the transition period draws closer.

UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen look set to meet in person this week in a bid to break the stalemate in post-Brexit trade deal talks.

Johnson and von der Leyen spoke on the telephone on Monday evening, and agreed to ask their chief negotiators to prepare an overview of the "remaining differences".

The leaders will then discuss them in person in a physical meeting in Brussels "in the coming days". Their second call in a little over 48 hours came after Michel Barnier and his UK counterpart David Frost spent the day talking in Brussels.

Later this week Johnson will head to Brussels for face-to-face talks with von der Leyen in an attempt to salvage a deal, with time running out before the current trading arrangements expire at the end of the month.

The FTSE 100 index was down 24.39 points, or 0.4%, at 6,530.90. The mid-cap FTSE 250 index was down 84.38 points, or 0.4%, at 19,845.35. The AIM All-Share index was down 0.5% at 1,068.88.

The Cboe UK 100 index was down 0.4% at 650.15. The Cboe 250 was down 0.8% at 17,127.54. The Cboe Small Companies down 0.2% at 11,586.10.

In mainland Europe, the CAC 40 in Paris was down 0.7% while the DAX 30 in Frankfurt was down 0.2%.

"Equity markets in Europe are a little lower this morning as uncertainty surrounding the future relationship between the UK and the EU is weighing on sentiment. Yesterday, continental indices and the FTSE 250 endured reasonably big falls as traders were spoked by the change in tone coming from both sides of the trade discussions - it swung from cautiously optimistic on Friday to apprehension," said CMC Markets analyst David Madden.

"Prime Minister Johnson will go to Brussels and that has tempered some of the bearish sentiment because the meeting indicates there is still a possibility a no-deal situation will be dodged. That being said, it would appear the bulls are watching from the sidelines," Madden added.

US stock market futures were pointed lower as concerns mount over a rise in coronavirus cases, putting pressure on US regulators to fast track a vaccine.

The Dow Jones Industrial Average called down 0.4%, the S&P 500 down 0.5% and the Nasdaq Composite down 0.3%.

The floundering efforts to quell the pandemic in the US have been widely criticised - the nation is the world's worst-hit with known infections approaching 15 million and more than 283,000 deaths.

The extent of the crisis was illustrated by the lockdown in California, the most populous American state, where authorities forced most offices to close and banned gatherings among different households.

Bars and services such as hair salons were shut and restaurants were only allowed to serve takeaways. Non-essential travel was also temporarily restricted statewide as California experienced record new Covid-19 cases.

The UK marked a historic moment earlier on Tuesday, becoming the first Western country to start a mass coronavirus vaccine campaign with a grandmother receiving the initial jab.

British pensioner Margaret Keenan, 90, said she felt "privileged" to be given the injection, the first of millions expected to be administered over the coming months in one of the world's worst-hit countries.

The UK's rollout of the Pfizer-BioNTech vaccine – the first country to start using the approved inoculations - is one of several vaccines bringing hope for an end to the pandemic.

On the London Stock Exchange, Ashtead Group up 3.5% was still the best blue-chip performer after the equipment rentals firm kept its interim dividend unchanged and expressed confidence for the year ahead. The stock hit a record high of 3,431.00 pence in early trade.

For the half-year ended October 31, revenue was down 3% to GBP2.29 billion from GBP2.45 billion last year and pretax profit was 22% lower to GBP506.2 million from GBP660.2 million.

London-based Ashtead's earnings were hurt by coronavirus lockdown measures but it expects to report full-year results ahead of previous expectations as the pandemic subsides.

Ashtead raised its full-year cashflow guidance to more than GBP1.2 billion, up from GBP1 billion previously, and annual revenue is now seen falling by 3% to 7% compared to the previous indication of 5% to 9%.

"It is remarkable that Ashtead's shares are setting a new all-time high today given the still-uncertain economic backdrop, but its second-quarter figures do show a further improvement in business momentum and investors are clearly still in the mood to price in a full-blown recovery in 2021 and beyond," said AJ Bell's Russ Mould.

Power utility stocks National Grid and SSE were up 2.6% and 1.8% respectively after UK energy regulator Ofgem will not slash the money that UK energy networks can give to their shareholders by as much as first indicated, after an initial plan to halve returns met resistance from the companies themselves.

Ofgem said on Tuesday it will allow network companies to pay a return on equity of 4.3% to their investors between 2021 and 2026, down from high returns of between 7% and 8% that are currently allowed.

The decision, which is Ofgem's final say on the matter, is slightly higher than the 3.95% that energy networks were told they could be facing in Ofgem's preliminary decision in July.

The decision, taken with other measures that Ofgem has proposed, will save customers about GBP10 per year on their energy bills. It includes billions of pounds for green investments.

National Grid and SSE both welcomed the Ofgem announcement, saying they would review the final determination in detail before deciding whether to appeal.

Intertek was up 2.5%. Bank of America double upgraded the quality assurance provider to Buy from Underperform.

At the other end of the large caps, InterContinental Hotels Group was down 3.2% after Jefferies downgraded the hotel operator to Underperform from Hold.

The pound was quoted at USD1.3336 at midday on Tuesday, lower from USD1.3346 at the London equities close Monday. Sterling is still down sharply from the USD1.35 mark reached at the end of last week.

Analysts at ActivTrades explained: "The British Prime Minister will meet the President of the European Commission later in the day with the two leaders trying to find common ground after their negotiating teams apparently find themselves at a deadlock and unable to agree on some core issues. The future relationship between the two parties now rests in the politicians' hands, with most investors still expecting a deal to be reached.

"However, such hopes will start to dissipate if there is no progress after today's encounter. The last few days brought moderate losses for the pound, as investors gently started to price-in the increasing likelihood of no-deal, but should the impasse persist after today's meeting between Ursula von der Leyen and Boris Johnson, more intense selling pressure will start to build around the British currency."

The euro was priced at USD1.2115, down from USD1.2137. Against the yen, the dollar was trading at JPY104.14, up from JPY103.94.

On the economic front, the eurozone economy saw the fastest rebound since 1995 on a quarterly basis as a rise in consumer spending fuelled a recovery in the third quarter, Eurostat said.

On an annual basis, the eurozone economy shrank by 4.3% in the third quarter, easing from a record slump of 14.7% in the previous quarter. The figure was revised up from the previous estimate of a contraction of 4.4%.

On a quarterly basis, the eurozone economy grew by 12.5% in the three months to September, recovering from a record contraction of 11.7% in the second quarter from the first quarter. The third-quarter reading was revised down slightly from the previous estimate of 12.6% growth.

Eurostat said this was "by far" the sharpest increase in growth since the time series started in 1995 and that the rebound in the third quarter was mostly driven by a recovery in consumer spending.

"This is still a surprisingly strong recovery from the first lockdown period though GDP remained well below the pre-Covid peak but the fourth quarter is likely to be much worse," analysts at ING noted.

Brent oil was trading at USD48.52 a barrel Tuesday midday, down from USD49.04 at the London equities close Monday. Gold was quoted at USD1,862.72 an ounce, lower from USD1,865.82.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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