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LONDON MARKET CLOSE: Brexit Turmoil Hits Pound Sending FTSE 100 Higher

LONDON (Alliance News) - The FTSE 100 ended higher on Wednesday, reversing losses seen in the ...

Alliance News 6 December, 2017 | 5:12PM
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LONDON (Alliance News) - The FTSE 100 ended higher on Wednesday, reversing losses seen in the previous session, while the pound sank amid the latest setback in Brexit negotiations, as Prime Minister Theresa May scrambled to secure the agreement needed on the Irish border to move talks forward.

The FTSE 100 index closed up 0.3%, or 20.53 points, at 7,348.03. The FTSE 250 ended down 0.2%, or 42.14 points, at 19,828.94, and the AIM All-Share closed down 0.9%, or 9.22 points, at 1,011.53.

The BATS UK 100 ended up 0.2% at 12,481.86, the BATS 250 closed down 0.2% at 18,011.44, and the BATS Small Companies ended 0.3% lower at 12,380.29.

"The FTSE 100 is outperforming eurozone indices like the DAX and the IBEX 35 as the weakness in the pound is making the internationally exposed British market more attractive to investors," said David Madden, market analyst at CMC Markets.

The pound was quoted at USD1.3379 at the London equities close, compared to USD1.3447 at the London equities close on Wednesday, following the latest developments in the ongoing Brexit negotiations.

"The pound is still down against the dollar and against the euro, with investors processing the lunchtime shock of Brexit Secretary David Davis admitting that the government hasn't done a sector-by-sector Brexit impact assessment," said Spreadex analyst Connor Campbell.

The pound had taken a knock earlier this week after the Democratic Unionist Party scuppered a deal to enable talks to move onto the second phase on Monday.

On Wednesday UK Prime Minister Theresa May pledged to protect the "constitutional integrity" of the UK in the negotiations to break the deadlock in the Brexit talks over the Irish border.

May, who spoke earlier by telephone to DUP leader Arlene Foster, said the government was committed to ensuring there was no return to a "hard border" between Northern Ireland and the Republic.

However, she told MPs at Prime Minister's Questions earlier Wednesday that the issue could only be finally resolved once negotiations with the EU move onto the second phase - including talks on a free trade deal.

"We will ensure that there is no hard border between Northern Ireland and the Republic of Ireland," May said.

"We will do that while we respect the constitutional integrity of the UK and while we respect the internal market and protect the internal market of the UK," she added.

In Paris the CAC 40 ended flat, while the DAX 30 in Frankfurt ended down 0.4%.

The euro was lower at USD1.1781 at the European equities close, against USD1.1832 the prior day.

On the London Stock Exchange, easyJet closed up 1.3% after JPMorgan double-upgraded the low-cost airline to Overweight from Underweight. In addition, easyJet reported growth in passenger numbers and an improved load factor for November.

easyJet said passenger numbers were up 8.1% to 5.3 million from 4.9 million in the same period last year. Load factor increased 2.6 percentage points in the month, up to 92.3% from 89.7% in November

At the other end of the large-cap index, retail property company Hammerson was the worst blue-chip performer closing down 5.3%, after it struck an all-share deal to merge with FTSE 250-listed Intu Properties.

Shares in Intu surged ending 15% higher, with the deal valuing the Lakeside shopping centre owner at GBP3.40 billion, a 28% premium to Intu's closing share price on Tuesday. The pair would form a GBP21 billion pan-European portfolio of retail and leisure assets with enhanced growth prospects, making it one of the largest retail real estate stocks in Europe.

"Although shopping centres have fallen out of favour with investors with the shift towards online retail, they are still able to stay relevant by offering experiential leisure activities to increase visitor dwell times. This trend is uniform across the European shopping centre landscape and accordingly, there is strong strategic rationale for combining both Hammerson and Intu," said Angus Grierson, managing director of LGB Corporate Finance.

However, CMC's Madden warned that the acquisition comes at a time when "there is major uncertainty surrounding the British commercial property sector due to Brexit".

Stagecoach Group closed up 4.1% after the transport operator said it made positive progress across all divisions in the first half of its current financial year as profit climbed higher despite a notable drop in revenue.

Stagecoach revenue in the six months to October 28 fell to GBP1.80 billion from GBP2.00 billion the year before, but better margins pushed operating profit from direct operations to GBP101.9 million from GBP93.9 million.

Languishing at the other end of the FTSE 250 was Saga, which saw around GBP432 million wiped off its total market value after the collapse of Monarch airlines and challenging trading conditions in its insurance broking business dented profits.

As such Saga, which sells insurance and holidays to people over the age of 50, said it now expects growth in underlying pretax profit to be between 1% and 2% for the year ending January 31, 2018.

PageGroup and Hays closed down 5.0% and 3.5% respectively after Deutsche Bank cut the recruiters to Sell from Hold, warning on valuations and long-term challenges within the staffing sector.

Stocks in New York were higher at the London equities close. The DJIA was up 0.1%, the S&P 500 index up 0.1% and the Nasdaq Composite up 0.2%.

In US economic news employment in the private sector increased by slightly more than expected in the month of November, payroll processor ADP revealed in a report.

ADP said private sector employment climbed by 190,000 jobs in November after surging up by 235,000 jobs in October. Economists had expected an increase of about 185,000 jobs.

The report also said the service-providing sector added 155,000 jobs, while employment in the goods-producing sector rose by 36,000 jobs.

"The job market is red hot, with broad-based job gains across industries and company sizes," said Mark Zandi, chief economist of Moody's Analytics.

On Friday, the Labor Department is scheduled to release its more closely watched monthly jobs report for November, which includes both public and private sector jobs. Employment is expected to increase by 198,000 jobs in November after surging up by 261,000 jobs in October. The unemployment is expected to hold at 4.1%.

"If these macro pointers suggest that the world's largest economy remains on track to end the year on a positive note, then the dollar could finally find some good support at a time when there is also some progress on the tax reform bill," said Forex.com analyst Fawad Razaqzada.

Investors will also be wary following US President Donald Trump's suggestion to recognise Jerusalem as Israel's capital, despite protest from Arabs, Muslims and Europeans.

Trump is set to speak at the White House at 1800 GMT, announcing that the US recognises Jerusalem as Israel's capital, which heads of Jerusalem churches warned the president could result in "irreparable harm". Jerusalem is claimed by both the Israelis and Palestinians as their capital.

Gold was quoted at USD1,263.21 an ounce at the London equities close against USD1,265.63 at the London equities close Wednesday.

Brent oil was lower quoted at USD61.63 a barrel at the London equities close compared to USD62.70 at the London equities close on Wednesday.

The economic events calendar on Thursday has Germany industrial production figures at 0700 GMT, UK Halifax house prices data at 0830 GMT, and the third quarter reading of eurozone GDP at 1000 GMT. In the afternoon there is US initial jobless claims, which prelude the jobs report for November on Friday, at 1330 GMT.

The UK corporate calendar on Thursday has half year results from recycled packaging firm DS Smith, which was promoted to the FTSE 100 after the quarterly FTSE index review last month. There are also full year results from social care services provider CareTech Holdings, and a strategy update from equipment rentals firm HSS Hire Group.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2017 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar
Rating
PageGroup PLC 448.60 GBX -0.36 -
Hammerson PLC 534.00 GBX 0.47 -
Stagecoach Group PLC 165.10 GBX -0.90 -
easyJet PLC 1,417.00 GBX -0.63 -
Intu Properties PLC 245.50 GBX 0.78 -
Saga PLC 124.00 GBX 0.00 -
Hays PLC 177.30 GBX 0.51 -
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