London close: Investors impassive as PM suspends Parliament for five weeks

London stocks finished higher on Wednesday, outperforming European peers as sterling slumped on news that Parliament would be prorogued for almost five weeks instead of the more typical one week, raising the odds of a 'no deal' Brexit, although it was still not seen as the most likely scenario by analysts, even if only by a scant margin.

By the end of trading, the FTSE 100 was up by 0.35% at 7,114.71, while the pound was down 0.44% against the US dollar to 1.22362 and by 0.35% versus the euro at 1.1043, respectively, after the Queen approved the Prime Minister's request to suspend Parliament and Boris Johnson announced his decision to hold a Queen's Speech on 14 October, just over a couple of weeks before the 31 October Brexit deadline.

Over on the second-tier index it was a different matter, with the FTSE 250 giving back 0.69% to finish at 19,202.99.

Following the announcements, Paul Dales at Capital Economics put the odds of a hard Brexit at around 45.0% and James Smith and Petr Krpata from ING at 30.0% or "slightly above".

However, the latter two continued to see the chances of a further extension of Article 50 followed by fresh elections at a slightly higher 35.0%.

And for Dales, the PM's decision "increases the downside risks to the economy and the pound by decreasing the chances of a further delay to Brexit and increasing the chances of a no deal Brexit on 31st October.

"[...] next week will be very hectic as Parliament may try to make the most of one of its last opportunities to prevent a no deal Brexit by trying to bring down the government. Next week could prove that "a week is a long time in politics"."

The weaker pound on the other hand meant the Footsie was able to outperform its peers in Europe on Tuesday, as worries about a recession kept markets there in the red.

CMC Markets analyst Michael Hewson said concerns over bond market recession warnings continue to weigh on investors' minds.

"There's been a lot of talk of yield curve inversions as a portent of an approaching recession, however the more significant development is the decline in 30-year yields below the Fed funds rate, something that has never happened before," he said.

In UK equity markets, supermarkets were the standout gainers, with Tesco, Morrisons and Sainsbury all higher after Investec upgraded its rating on Morrisons to 'buy' from 'hold'.

Oil giant BP gained after agreeing on Tuesday to sell its entire Alaska business to private oil and gas company Hilcorp Energy for $5.6bn.

Bakery chain Greggs was a high riser after UBS upgraded its stance on shares of the bakery chain to 'buy' from 'neutral', pointing to significant growth opportunities.

Fashion retailer Ted Baker was trading higher after signing a deal with Japan's Sojitz Infinity to sell its goods in Japanese department stores.

On the downside, housebuilders took a beating amid fears of a no-deal Brexit, with Persimmon, Berkeley Group, Barratt Developments, Bovis Homes and Redrow all weaker. Airlines were also on the back foot, with British Airways and Iberia parent IAG and EasyJet lower.

Prudential fell after Bank of America-Merrill Lynch took the stock off its Europe 1 List, which is its department-wide list of best research ideas.

Elsewhere, oil industry engineer Petrofac was in the red after it reported a fall in interim core earnings due to a decline in contract margins, higher overheads and higher tax and warned of lower revenues in 2020. Earnings before interest, tax, depreciation and amortisation fell 9% to $305m.

Retailer WH Smith reversed earlier gains even as it said its travel division continues to perform strongly and that results for the year to the end of August will be in line with expectations.

Outside the FTSE 350, shares in Thomas Cook fell sharply as the embattled travel operator said that it has agreed the main terms of a £900m rescue deal. As part of the deal, China's Fosun - already the largest shareholder - will take a 75% stake in the tour operating business and a 25% stake in Thomas Cook's airline for £450m. Meanwhile, the company's core lending banks and noteholders will shell out £450m for a 75% stake in the airline and a 25% share of the tour operator.

Market Movers

FTSE 100 (UKX) 7,114.71 0.35%
FTSE 250 (MCX) 19,202.99 -0.69%
techMARK (TASX) 3,806.52 -0.16%

FTSE 100 - Risers

Fresnillo (FRES) 728.00p 4.36%
NMC Health (NMC) 2,371.00p 3.18%
Tesco (TSCO) 218.80p 2.39%
BHP Group (BHP) 1,712.00p 2.36%
BP (BP.) 498.75p 2.19%
Reckitt Benckiser Group (RB.) 6,365.00p 1.77%
Pearson (PSON) 822.80p 1.71%
BT Group (BT.A) 162.60p 1.62%
Anglo American (AAL) 1,717.60p 1.61%
Melrose Industries (MRO) 170.50p 1.58%

FTSE 100 - Fallers

Berkeley Group Holdings (The) (BKG) 3,775.00p -4.84%
Taylor Wimpey (TW.) 143.10p -3.57%
Barratt Developments (BDEV) 625.00p -3.43%
Aveva Group (AVV) 3,712.00p -3.38%
Persimmon (PSN) 1,871.50p -2.85%
Mondi (MNDI) 1,554.50p -2.60%
Hargreaves Lansdown (HL.) 1,871.50p -2.51%
Bunzl (BNZL) 1,978.50p -2.39%
Hiscox Limited (DI) (HSX) 1,553.00p -2.02%
Admiral Group (ADM) 2,124.00p -1.89%

FTSE 250 - Risers

Greggs (GRG) 2,054.00p 4.48%
Metro Bank (MTRO) 280.00p 3.55%
CYBG (CYBG) 140.10p 3.50%
Tullow Oil (TLW) 217.30p 3.33%
Premier Oil (PMO) 77.92p 3.12%
William Hill (WMH) 168.00p 3.04%
Hochschild Mining (HOC) 225.20p 2.84%
Polymetal International (POLY) 1,183.00p 2.78%
AJ Bell (AJB) 400.00p 2.56%
Acacia Mining (ACA) 269.20p 2.28%

FTSE 250 - Fallers

Amigo Holdings (AMGO) 141.00p -8.40%
Provident Financial (PFG) 381.30p -8.00%
Wood Group (John) (WG.) 364.90p -6.46%
IP Group (IPO) 56.30p -6.39%
Fisher (James) & Sons (FSJ) 2,005.00p -5.65%
Rank Group (RNK) 167.40p -5.22%
Cineworld Group (CINE) 221.30p -4.69%
SIG (SHI) 121.30p -4.11%
OneSavings Bank (OSB) 328.00p -3.98%
Aston Martin Lagonda Global Holdings (AML) 467.90p -3.94%