London midday: Stocks in the red as sterling gains on Brexit headlines

London stocks were firmly in the red by midday on Wednesday amid worries about the Covid-19 crisis and related restrictions and as sterling was boosted by the latest Brexit headlines.

The FTSE 100 was down 1.1% at 5,824.64, while the pound was up 0.9% against the dollar at 1.3059 after the EU’s chief Brexit negotiator, Michel Barnier, told the European parliament that an agreement with the UK could be reached.

Barnier said: "Despite the difficulties we’ve faced, an agreement is within reach if both sides are willing to work constructively, if both sides are willing to compromise and if we are able to make progress in the next few days on the basis of legal texts and if we are ready over the next few days to resolve the sticking points, the trickiest subjects."

The top-flight index tends to lose ground when the pound rallies as around 70% of its constituents derive their earnings from overseas.

It wasn’t just sterling weighing on stock markets, however, with concerns about Covid restrictions very much at the forefront of investor’s minds after Greater Manchester was plunged into a tier 3 lockdown.

Market participants were also digesting the latest figures from the Office for National Statistics, which showed showed the UK government borrowed £36.1bn in September, taking borrowing in the first six months of the financial year to a record £208.5bn.

Separate ONS figures showed that annual consumer price inflation in September rose to 0.5% from 0.2% in August, when it had been cut by the government’s "Eat out to Help Out" subsidised meal scheme to help the restaurant sector.

Inflation accelerated as the scheme wound down scheme and a surge in demand for second-hand cars pushed up prices.

The government borrowed £174.5bn more in the half year than in the same period last year - the highest in any April to September period since records began in 1993. Each of the six months from April to September 2020 were also records, the ONS said.

Capital Economics said: "With CPI inflation just 0.5% in September, it’s hard to think of reasons why the Bank of England won’t launch another £100bn or so of QE at the November meeting. And despite public borrowing still jumping, the government may yet spend more."

The prospect of further US stimulus was also in focus after US House Speaker Nancy Pelosi said she was hopeful for a stimulus agreement this week, which would be bigger, better and retroactive. However, Senate Majority Leader Mitch McConnell warned the White House against a bigger Pelosi-led deal before 3 November.

In equity markets, precious metals miner Fresnillo lost its shine after trimming its full-year gold production guidance, while Centamin slumped after it said gold production and sales fell in the third quarter.

British Airways and Iberia owner IAG was weaker despite an upgrade to ‘buy’ from ‘hold’ at Goodbody, which said the company’s third-quarter results at the end of the month should provide "comfort".

Bookmaker William Hill was little changed despite warning that local UK coronavirus lockdowns would hit core earnings as third quarter revenue fell 9% due lower gaming income.

Market Movers

FTSE 100 (UKX) 5,824.64 -1.10%
FTSE 250 (MCX) 17,837.12 -0.51%
techMARK (TASX) 3,777.46 -0.99%

FTSE 100 - Risers

Evraz (EVR) 368.30p 1.91%
Rolls-Royce Holdings (RR.) 230.60p 1.59%
BT Group (BT.A) 101.00p 0.95%
NATWEST GROUP PLC ORD 100P (NWG) 116.40p 0.82%
Standard Chartered (STAN) 382.90p 0.60%
Aveva Group (AVV) 4,512.00p 0.60%
Kingfisher (KGF) 322.00p 0.59%
Pennon Group (PNN) 1,003.50p 0.45%
Barclays (BARC) 104.66p 0.33%
3i Group (III) 1,057.00p 0.19%

FTSE 100 - Fallers

Fresnillo (FRES) 1,270.00p -4.73%
Compass Group (CPG) 1,170.50p -2.62%
Hargreaves Lansdown (HL.) 1,345.50p -2.54%
CRH (CRH) 2,862.00p -2.22%
Diageo (DGE) 2,574.50p -2.13%
Standard Life Aberdeen (SLA) 242.30p -2.06%
Melrose Industries (MRO) 131.80p -1.97%
Intermediate Capital Group (ICP) 1,297.00p -1.97%
Unilever (ULVR) 4,742.00p -1.94%
Croda International (CRDA) 6,276.00p -1.94%

FTSE 250 - Risers

Cineworld Group (CINE) 30.00p 5.63%
AO World (AO.) 327.00p 3.65%
Softcat (SCT) 1,181.00p 2.87%
Marks & Spencer Group (MKS) 94.94p 2.57%
Dixons Carphone (DC.) 107.00p 2.49%
Caledonia Investments (CLDN) 2,705.00p 2.46%
Dunelm Group (DNLM) 1,489.00p 2.13%
XP Power Ltd. (DI) (XPP) 4,400.00p 2.09%
Royal Mail (RMG) 248.40p 1.80%
OneSavings Bank (OSB) 302.80p 1.75%

FTSE 250 - Fallers

Centamin (DI) (CEY) 129.45p -20.34%
Network International Holdings (NETW) 274.20p -11.83%
Aston Martin Lagonda Global Holdings (AML) 48.20p -3.60%
Petropavlovsk (POG) 29.00p -3.33%
Calisen (CLSN) 160.00p -3.03%
TUI AG Reg Shs (DI) (TUI) 295.70p -2.60%
Mitchells & Butlers (MAB) 137.20p -2.56%
Beazley (BEZ) 323.60p -2.53%
Renishaw (RSW) 5,740.00p -2.46%
Meggitt (MGGT) 298.40p -2.45%