London open: Stocks edge up after Monday's selloff
London stocks were a little higher in early trade on Tuesday following heavy falls in the previous session amid worries about a new strain of Covid-19, with Brexit hopes helping to underpin sentiment.
At 0900 GMT, the FTSE 100 was up 0.4% at 6,444.33, while the FTSE 250 was 1.2% firmer at 19,923.61.
Meanwhile, the pound was 0.2% lower against the dollar at 1.3441 and 0.1% higher versus the euro at 1.1001, having tumbled a day earlier.
Neil Wilson, chief market analyst at Markets.com, said: "Shares across Europe rose as markets absorbed the implications of the new coronavirus with a little more sanguinity than on Monday. There was heavy selling early doors yesterday, but across risk assets the lows were well off where we finished.
"As usual, markets overshoot on the downside whenever there is trouble, which can be easily faded, and the lack of liquidity at this time of year can exaggerate moves in either direction. Trouble over here was felt across the pond. The S&P 500 closed down 0.4% despite Congress finally agreeing to the $892bn Covid relief package. Donald Trump is expected to sign the bill into law today. The Dow rallied slightly with Goldman Sachs and JPMorgan rising on the Fed’s decision to allow banks to carry out share buybacks."
Reports of progress in Brexit negotiations were helping to lift the mood, with the UK said to have made an offer to the EU on fisheries in a last-ditch attempt to get an agreement before Christmas.
"It’s still hanging by a thread but if all that’s left is a few million euros in sardines then you’d have to think that a deal is more likely than not," Wilson said.
On the macroeconomic front, investors were mulling the latest data from the Office for National Statistics, which showed that UK gross domestic product grew by a record 16% in the third quarter, while government borrowing surged last month.
GDP rose by 16% in Q3, up from an initial estimate of 15.5%. This means the economy is still 8.6% below where it was at the end of last year, up from an initial estimate of 9.7% below.
Separate data from the ONS showed that government borrowing rose to £31.6bn in November, compared to consensus expectations of £31.4bn. This was a £26bn increase on November 2019, which is both the highest November borrowing and the third-highest borrowing in any month since monthly records began in 1993.
Ruth Gregory, senior UK economist at Capital Economics, said borrowing will probably remain high over the next few months as Covid-19 restrictions stay in place.
"Of course, Q3 and November are old news," she said. "And the possibility that the new Tier 4 Covid-19 restrictions are extended and broadened in the coming months means that the risks to our Q1 GDP forecast (+1.0% q/q) are weighted heavily to the downside."
In equity markets, banks were among the top gainers after heavy declines on Monday, with Lloyds, Barclays and NatWest all higher.
British Airways and Iberia owner IAG and engine maker Rolls-Royce also gained after sharp falls in the previous session.
Elsewhere, building materials distributor Grafton Group was in the black after announcing the acquisition of Dublin-based Proline Architectural Hardware for an undisclosed sum.