London close: Stocks rally on Brexit deal, US stimulus

London stocks rallied on Tuesday as investors cheered a US stimulus package and the UK’s Brexit deal, although banks were under pressure.

The FTSE 100 ended up 1.6% at 6,602.65, having hit its highest level in nine months, while the domestically-focused FTSE 250 closed up 1.7% at 20,897.59.

Sentiment was boosted after US President Donald Trump signed a $2.3trn Covid relief and spending package, averting a partial government shutdown. The bill includes $900bn of Covid aid and $1.4trn in spending to fund government agencies.

Trump had previously criticising the bill for being "wasteful spending" and refused to sign it.

The mood was also lifted by news that EU ambassadors had on Monday given the green light to the Brexit trade deal to come into provisional force from 1 January.

Russ Mould, investment director at AJ Bell, said markets seemed to be welcoming the Brexit deal that was announced on Christmas Eve.

"However, the agreement struck between London and Brussels is yet to win universal acclaim, even if that is the inevitable result of the compromises that the Prime Minister had to make to get the deal over the line before the end of the transition period and confirmation of the UK’s departure from the economic bloc.

"That there are questions still be to answered can be seen in two ways.

"The first is through the medium of the pound. Sterling may be closing out 2020 at pretty much its highest level against the dollar all year but it is trading much nearer to its 12-month lows than its highs against the euro. Moreover, the pound is still down by 9% against the buck and 15% against the single currency relative to where it stood in June 2016 before the Brexit referendum.

"The second is through the identity of the immediate winners and losers in the stock market. Multinationals, who are the likeliest beneficiaries of frictionless, tariff-free trade and overseas currency earners are generally leading the charge in the FTSE 100, including Intertek and Diageo. Yet the laggards are nearly all banks and providers financial services, a trend which can also be seen in the FTSE 250 where asset managers and insurers such as Ninety One and Sabre are among the day’s losers."

In equity markets, AstraZeneca rose sharply amid expectations its Covid vaccine with Oxford University will be approved for use in the UK within days and after saying that it and Merck’s Lynparza treatment had been approved in Japan for the treatment of advanced ovarian, prostate and pancreatic cancers.

British Airways and Iberia parent IAG also rallied, along with InterContinental Hotels amid hopes of brighter prospects for the travel and leisure sector next year.

Insurer Admiral gained after agreeing to sell its Penguin Portals and Preminen comparison businesses, which include online portal Confused.com, to RVU - the comparison division of ZPG - in a deal valued at £508m.

On the downside, banks fell after Prime Minister Boris Johnson conceded that the Brexit deal was limited when it came to rules for financial services, with Lloyds, Barclays and NatWest all firmly lower.

Market Movers

FTSE 100 (UKX) 6,602.65 1.55%
FTSE 250 (MCX) 20,897.59 1.71%
techMARK (TASX) 4,166.50 1.76%

FTSE 100 - Risers

Halma (HLMA) 2,517.00p 4.96%
Pershing Square Holdings Ltd NPV (PSH) 2,545.00p 4.73%
Diageo (DGE) 3,045.50p 4.51%
Kingfisher (KGF) 277.10p 4.41%
Smith & Nephew (SN.) 1,592.00p 4.36%
Next (NXT) 7,224.00p 4.27%
Spirax-Sarco Engineering (SPX) 11,625.00p 4.21%
Smurfit Kappa Group (SKG) 3,546.00p 4.05%
Polymetal International (POLY) 1,748.50p 3.86%
Rentokil Initial (RTO) 527.60p 3.82%

FTSE 100 - Fallers

Lloyds Banking Group (LLOY) 36.75p -4.79%
Barclays (BARC) 149.34p -3.40%
NATWEST GROUP PLC ORD 100P (NWG) 163.35p -3.31%
BT Group (BT.A) 135.85p -1.81%
Rolls-Royce Holdings (RR.) 113.85p -1.64%
Whitbread (WTB) 3,162.00p -1.62%
Evraz (EVR) 472.10p -1.09%
M&G (MNG) 202.40p -0.98%
Barratt Developments (BDEV) 681.60p -0.93%
Persimmon (PSN) 2,854.00p -0.73%

FTSE 250 - Risers

Aston Martin Lagonda Global Holdings (AML) 1,958.60p 6.86%
PureTech Health (PRTC) 397.00p 6.43%
Moneysupermarket.com Group (MONY) 268.00p 6.18%
Network International Holdings (NETW) 322.60p 6.12%
C&C Group (CCR) 229.00p 6.02%
Hill & Smith Holdings (HILS) 1,474.00p 5.44%
BMO Commercial Property Trust Limited (BCPT) 82.40p 5.37%
Herald Investment Trust (HRI) 2,230.00p 5.19%
Diploma (DPLM) 2,200.00p 5.16%
Trainline (TRN) 468.20p 5.07%

FTSE 250 - Fallers

Cairn Energy (CNE) 205.00p -3.76%
Sabre Insurance Group (SBRE) 271.50p -3.38%
Wood Group (John) (WG.) 316.80p -2.22%
Just Group (JUST) 71.20p -2.13%
Micro Focus International (MCRO) 435.50p -1.63%
WH Smith (SMWH) 1,557.00p -1.58%
Wetherspoon (J.D.) (JDW) 1,134.00p -1.56%
Ferrexpo (FXPO) 292.80p -1.41%
Dixons Carphone (DC.) 121.70p -1.30%
Cineworld Group (CINE) 64.34p -1.26%