London close: Stocks start February higher with focus on next phase of trade talks
London stocks started the month of February on the front foot, but only modestly, as sterling tumbled amid worries about a hard Brexit.
By session's end, the FTSE 100 was up 0.55% at 7,326.31, while the pound fell 1.56% against the US dollar to 1.2999 and 1.25% versus the euro to 1.1754 as Prime Minister Boris Johnson said there was "no need" for the UK to follow European Union rules as part of a future trade deal.
The Prime Minister said that Westminster wanted a 'Canada style' free trade deal with the EU, but added that the UK was prepared to walk away from talks rather than accept EU demands to sign up to single market regulations.
Johnson said: "There is no need for a free-trade agreement to involve accepting EU rules on competition policy, subsidies, social protection, the environment, or anything similar any more than the EU should be obliged to accept UK rules."
Speaking in Brussels earlier, the EU’s chief Brexit negotiator, Michel Barnier, said the bloc was ready to offer a "highly ambitious" trade deal with zero tariffs on goods. The "exceptional offer" is dependent on aligning with EU standards and making sure competition remains "open and fair", he said. Barnier said there must be a level playing field "over the long term" and a deal on fisheries, involving reciprocal access to waters
A weaker pound tends to boost the top-flight index as around 70% of its constituents derive most of their earnings from abroad.
Neil Wilson, chief market analyst at Markets.com, said: "We’ve got a return to headline risk - no deal is not the base case by any means but the EU and UK look in very different places right now at the start of talks. It’s going to be a very long and rocky road to get there and the shape of the deal will hinge on some important concessions on both sides.
"The British government has come out swinging but they’re up against a tough opponent."
There was a glimmer of goods news on the macro front as the latest Markit/CIPS manufacturing purchasing managers’ index ticked up to 50.0 from 47.5 in December, coming in ahead of the flash estimate of 49.8 and hitting a nine-month high.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The fading of near-term Brexit risks following the general election has allowed the manufacturing sector a brief window to recover, though the hard Brexit envisaged by the government spells trouble later this year."
Earlier, the People’s Bank of China cut the seven- and 14-day reverse repo rates by 10 basis points and injected 1.2 trn yuan of liquidity into the financial system through reverse repos.
Chinese shares tumbled, with the Shanghai Composite Index ending down nearly 8% as traders returned from the Lunar New Year break. Analysts were quick to point out that losses could have been even bigger had it not been for the PBOC’s intervention.
In equity markets, easyJet flew higher, taking its cue from Ryanair, which rose sharply after saying it swung to a profit in the third quarter.
Elsewhere, Imperial Brands ticked up as it appointed Inchcape chief executive Stefan Bomhard to its top job, replacing Alison Cooper who stepped down with immediate effect.
Future rallied after it said the outcome for the full year was set to be "materially ahead" of current market expectations, despite some uncertainty in the macro-economic environment. On Friday, shares in the magazine publisher slumped after London-based research firm and short-seller Shadowfall Research said it was short the stock, arguing that it was overvalued.
Aston Martin Lagonda was under the cosh, having risen sharply on Friday after announcing a rescue deal.
Market Movers
FTSE 100 (UKX) 7,326.31 0.55%
FTSE 250 (MCX) 21,160.85 0.08%
techMARK (TASX) 4,150.59 0.55%
FTSE 100 - Risers
easyJet (EZJ) 1,445.50p 3.84%
Auto Trader Group (AUTO) 579.20p 3.06%
Scottish Mortgage Inv Trust (SMT) 598.00p 2.93%
Diageo (DGE) 3,098.00p 2.92%
Rentokil Initial (RTO) 479.80p 2.74%
Smurfit Kappa Group (SKG) 2,696.00p 2.59%
TUI AG Reg Shs (DI) (TUI) 798.40p 2.57%
CRH (CRH) 2,923.00p 2.31%
Aveva Group (AVV) 5,030.00p 2.28%
Melrose Industries (MRO) 238.20p 2.14%
FTSE 100 - Fallers
NMC Health (NMC) 1,030.50p -19.81%
Polymetal International (POLY) 1,257.00p -2.26%
Royal Dutch Shell 'B' (RDSB) 1,963.20p -1.84%
Royal Dutch Shell 'A' (RDSA) 1,964.40p -1.50%
BP (BP.) 452.70p -0.88%
United Utilities Group (UU.) 1,005.00p -0.84%
Morrison (Wm) Supermarkets (MRW) 180.45p -0.82%
Sainsbury (J) (SBRY) 201.00p -0.69%
RSA Insurance Group (RSA) 547.20p -0.58%
Royal Bank of Scotland Group (RBS) 217.10p -0.55%
FTSE 250 - Risers
Watches of Switzerland Group (WOSG) 390.00p 4.45%
Avast (AVST) 443.80p 4.42%
Future (FUTR) 1,332.00p 4.06%
Drax Group (DRX) 282.00p 3.68%
IntegraFin Holding (IHP) 510.00p 3.03%
Network International Holdings (NETW) 626.00p 2.96%
Virgin Money UK (VMUK) 169.00p 2.89%
Just Group (JUST) 80.20p 2.82%
FDM Group (Holdings) (FDM) 1,008.00p 2.75%
Trainline (TRN) 484.50p 2.65%
FTSE 250 - Fallers
PureTech Health (PRTC) 285.00p -8.06%
Finablr (FIN) 76.05p -7.93%
Vivo Energy (VVO) 105.00p -6.25%
FirstGroup (FGP) 118.00p -4.68%
Aston Martin Lagonda Global Holdings (AML) 476.20p -4.53%
Helios Towers (HTWS) 140.60p -4.42%
ICG Enterprise Trust (ICGT) 950.00p -4.35%
Micro Focus International (MCRO) 986.50p -3.77%
Tullow Oil (TLW) 49.00p -3.62%
Centamin (DI) (CEY) 131.40p -3.38%