LONDON MARKET OPEN: Banks, Housebuilders Rally As UK-EU Talks Continue

(Alliance News) - Both the FTSE 100 and pound were higher at the start of the week after the UK and EU agreed to continue talks on post-Brexit trade, boosting London-listed listed banks and housebuilders.

The FTSE 100 index was up 11.71 points, or 0.2%, at 6,558.46 early Monday. The mid-cap FTSE 250 index was up 193.04 points, or 1.0%, at 19,815.19. The AIM All-Share index was up 0.4% at 1,064.99.

The Cboe UK 100 index was up 0.1% at 652.88. The Cboe 250 was up 1.1% at 17,093.93, and the Cboe Small Companies up 0.2% at 11,201.60.

The top blue-chip performers in London were domestically exposed names, such as banks and housebuilders, on hopes that a no-deal Brexit can yet be averted.

UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen agreed to go the "extra mile" in a bid to prevent a no-deal scenario on January 1 when transition arrangements come to an end.

Johnson, speaking after the call with von der Leyen, said the UK would not be walking away from the negotiating table and that "where there is life, there is hope".

With no cut-off date given for when the talks must wrap up, it leaves the door open for the wrangling to go on until December 31 – when the transitional arrangements are due to cease.

Commons Leader Jacob Rees-Mogg has still not published the dates for MPs' Christmas holiday, leaving those on the green benches braced to be called in to Westminster over the festive season to vote on a possible UK-EU trade deal.

Housebuilders Persimmon, Taylor Wimpey and Barratt Developments were up 5.3%, 5.1% and 4.9% respectively. Banks such as Lloyds, Natwest and Barclays rose 5.2%, 5.1% and 4.2% respectively.

"The fact is that lawmakers have given the Brexit talks another chance, traders are hoping that Boris Johnson and Ursula von der Leyen will both reach a deal at the last minute," said Naeem Aslam, chief market analyst at AvaTrade.

He added: "Looking at the Brexit negotiation history, there is always a deal, but it happens at the last minute, and this is what traders are expecting next time as well. The sterling-dollar pair is holding on to its gains, and the door is open for the currency pair to touch the USD1.35 mark."

Sterling was quoted at USD1.3393 early Monday, up 1.3% from USD1.3217 at the London equities close on Friday. The euro traded at USD1.2154 early Monday, up 0.4% from USD1.2110 late Friday.

In mainland Europe, the CAC 40 in Paris was up 0.9% while the DAX 30 in Frankfurt was up 1.0% early Monday.

In Asia on Monday, the Nikkei 225 in Tokyo index closed up 0.3%. Against the yen, the dollar edged up to JPY103.91 versus JPY103.90.

In China, the Shanghai Composite closed up 0.7%, while the Hang Seng index in Hong Kong ended down 0.4%.

Back in London, AstraZeneca was the worst performer in the FTSE 100, down 5.5% in opening dealings.

The pharmaceutical giant on Saturday said it was buying US biotech firm Alexion Pharmaceuticals Inc for USD39 billion to boost its work on immunology.

"Alexion has established itself as a leader in complement biology, bringing life-changing benefits to patients with rare diseases," AstraZeneca Chief Executive Pascal Soriot said in a statement, announcing the year's biggest deal in the pharma sector.

Both boards have agreed to the cash-and-stock deal, which values Alexion at USD175 a share, a premium of 45% to the Boston-based company's closing price on Friday in New York of USD120.98.

In other M&A news, Codemasters shares jumped 18% to 630.24 pence. Electronic Arts on Monday crashed Take-Two Interactive's takeover offer for Codemasters, wading in with an approach valuing the London-listed video game developer at GBP945 million.

Redwood City, California-based EA's 604 pence per share cash offer tops New York-based Take-Two's bid, made in November, of 120p per share in cash and 365p in Take-Two shares, valuing Codemasters at 485p per share and GBP726 million as a whole.

Codemasters directors intend to recommend unanimously that shareholders vote in favour of the EA deal, and the board withdrew its recommendation of the Take-Two offer.

"The board of Codemasters firmly believes the company would benefit from EA's knowledge, resources and extensive global scale - both overall and specifically within the racing sector. We feel this union would provide an exciting and prosperous future for Codemasters, allowing our teams to create, launch and service bigger and better games to an extremely passionate audience," said Codemasters Chair Gerhard Florin.

Take-Two said it will consider its position following the EA move and will make a further announcement "when appropriate".

Elsewhere in London, Polypipe shares rallied 7.6% after saying its performance in November and the likely outcome for December has "again exceeded expectations".

Revenue for November was 8.0% higher than the prior year, with Residential markets performing particularly well. Operating margins continue to benefit from the drop through of improved volumes, although are still not back to normal levels due to "operating inefficiencies" caused by Covid-19.

Polypipe now expects underlying operating profit for 2020 to be around GBP40 million, versus the current consensus range of GBP35 million to GBP37 million.

"The group enters the new year with a strong order book and some cautious optimism, although uncertainty currently exists about the effects of a no-deal Brexit," the plastic piping systems manufacturer said.

Gold was quoted at USD1,829.89 an ounce early Monday, lower than USD1,843.56 on Friday. Brent oil was trading at USD50.73 a barrel, higher than USD50.04 late Friday.

In Monday's economic calendar, there is eurozone industrial production at 1000 GMT.

By Lucy Heming; lucyheming@alliancenews.com

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