London midday: Stocks extend gains as pound slumps on Brexit fears

London stocks had extended gains by midday on Monday as sterling slumped amid fears of a no-deal Brexit.

The FTSE 100 was up 1.6% at 5,891.18, while the pound was down 0.9% against the dollar at 1.3157 following reports the UK government is drawing up new laws that would that would override part of last year's EU withdrawal agreement.

Prime Minister Boris Johnson has demanded a deal be reached by October 15. Johnson’s threat to undermine an international treaty would see Britain remove a legal requirement for new Northern Ireland customs inspections which were designed to stop the return of checks at the border with the Irish Republic.

The prime minister was reportedly set to tell the EU that unless a deal is struck by the October deadline the UK would be ready to trade on World Trade Organisation terms from January.

Spreadex analyst Connor Campbell said "Brexit came roaring back into the picture over the weekend - specifically fears of a no-deal Brexit, after reports broke that Boris Johnson’s government is preparing to unveil legislation regarding Northern Ireland on Wednesday that will override what is written in January’s withdrawal agreement".

"That act of aggression arrived alongside a fresh ultimatum, with Johnson claiming Britain will walk away from the table for good if a deal isn’t reached by October 15th. One final twist of the knife came as Johnson stated no deal was actually a ‘good outcome’.

"It is another example of the government actively chasing a no-deal Brexit, despite their pre-election claims of an ‘oven-ready’ agreement, and could pose a serious threat to sterling’s recent gains in the coming weeks."

The FTSE 100 tends to benefit when the pound weakens, as around 70% of its constituents derive their earnings from overseas.

Investors were also mulling over the latest survey from mortgage lender Halifax, which showed annual house price growth hit a new high in August thanks in part to pent-up demand following the Covid-19 lockdown.

House prices rose 5.2% on the year to £245,747, up from 3.8% growth in July and marking the strongest level of growth since late 2016. On the month, prices were up 1.6% following a 1.7% increase in July.

Halifax managing director Russell Galley said: "A surge in market activity has driven up house prices through the post-lockdown summer period, fuelled by the release of pent-up demand, a strong desire amongst some buyers to move to bigger properties, and of course the temporary cut to stamp duty."

Analysts were sceptical that the rise in prices could be sustained, however. Capital Economics said pent-up demand will soon be expended, while a weak economy, cautious lenders and the end of the stamp duty cut will weigh on prices. "We think house price growth will soon start to moderate, slowing to a standstill in 2021."

In equity markets, Associated British Foods rallied as it said Primark's annual profit would at least be at the top of guidance after strong trading at the clothes chain in the fourth quarter.

Transport operator FirstGroup surged after The Sunday Telegraph reported that its US operations have attracted interest from several major private equity firms.

Media company Future pushed higher after saying it FY20 results are set to be "materially ahead" of market expectations.

Housebuilder Crest Nicholson gained after an upgrade to ‘buy’ at Deutsche Bank, which said strong action has been taken to address the cost base and the stock is attractively valued.

Market Movers

FTSE 100 (UKX) 5,891.18 1.59%
FTSE 250 (MCX) 17,647.45 1.69%
techMARK (TASX) 3,766.98 1.81%

FTSE 100 - Risers

Scottish Mortgage Inv Trust (SMT) 895.00p 5.42%
Rolls-Royce Holdings (RR.) 226.20p 4.00%
Avast (AVST) 551.00p 3.86%
Barratt Developments (BDEV) 521.00p 3.83%
Melrose Industries (MRO) 119.80p 3.68%
M&G (MNG) 163.10p 3.62%
Polymetal International (POLY) 1,986.50p 3.52%
Ashtead Group (AHT) 2,651.00p 3.51%
Just Eat Takeaway.Com N.V. (CDI) (JET) 8,154.00p 3.37%
Fresnillo (FRES) 1,310.50p 3.35%

FTSE 100 - Fallers

International Consolidated Airlines Group SA (CDI) (IAG) 216.50p -1.32%
Evraz (EVR) 322.90p -1.31%
NATWEST GROUP PLC ORD 100P (NWG) 106.65p -1.07%
Lloyds Banking Group (LLOY) 26.86p -0.30%
BT Group (BT.A) 101.75p 0.10%
Whitbread (WTB) 2,530.00p 0.16%
HSBC Holdings (HSBA) 320.40p 0.20%
British American Tobacco (BATS) 2,560.00p 0.22%
Admiral Group (ADM) 2,564.00p 0.31%
Barclays (BARC) 107.30p 0.39%

FTSE 250 - Risers

FirstGroup (FGP) 47.34p 19.06%
Future (FUTR) 1,664.00p 14.44%
Crest Nicholson Holdings (CRST) 206.60p 9.08%
Dechra Pharmaceuticals (DPH) 3,368.00p 9.07%
National Express Group (NEX) 125.50p 7.54%
AO World (AO.) 189.00p 6.18%
Travis Perkins (TPK) 1,247.50p 5.81%
Airtel Africa (AAF) 60.90p 5.73%
Network International Holdings (NETW) 408.40p 5.48%
Allianz Technology Trust (ATT) 2,400.00p 5.26%

FTSE 250 - Fallers

Petrofac Ltd. (PFC) 147.25p -2.84%
Biffa (BIFF) 200.50p -1.96%
Hammerson (HMSO) 260.05p -1.94%
Paragon Banking Group (PAG) 340.60p -1.84%
Kainos Group (KNOS) 1,024.00p -1.35%
Wizz Air Holdings (WIZZ) 3,656.00p -1.19%
Softcat (SCT) 1,286.00p -1.15%
XP Power Ltd. (DI) (XPP) 4,370.00p -1.13%
Coats Group (COA) 53.90p -1.10%
HGCapital Trust (HGT) 272.00p -1.09%