London close: Stocks finish weaker as pound rallies on Brexit hopes
London stocks finished well into negative territory 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 ended the session down 1.91% at 5,776.50, and the FTSE 250 was off 0.79% at 17,787.82.
Sterling, meanwhile, was up 1.72% against the dollar to last trade at $1.3171, and gained 1.27% on the euro to €1.1091.
“The FTSE 100 is deep in the red thanks largely to the rally in the pound,” said CMC Markets analyst David Madden.
“Optimism is circulating with respect to the possibility of the UK and the EU achieving a trade deal, hence the upward move in sterling.
“Stocks like Diageo, AstraZeneca, Unilever, GlaxoSmithKline and British American Tobacco are weighing on the British index because of the rally in the pound.”
Madden explained that the companies all earn a relatively high portion of their total revenue overseas, so sterling’s positive run pushed them into the red.
“The major European indices are showing losses too as traders on this side of the Atlantic are worried about the tougher restrictions brought on by the pandemic.
“The fact that US lawmakers have yet to strike a deal over the proposed Covid-19 relief package is playing a role in the bearish move too.”
Earlier, the EU’s chief Brexit negotiator, Michel Barnier, told the European parliament that an agreement with the UK could be reached.
“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,” Barnier said.
It wasn’t just sterling weighing on stock markets, however, with concerns about Covid-19 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 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 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.
“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,” noted Capital Economics.
“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 4.35% after trimming its full-year gold production guidance, while Centamin slumped 19.2% after it said gold production and sales fell in the third quarter.
British Airways and Iberia owner IAG was 5.99% 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 ahead 0.36%, even after it warned that local UK coronavirus lockdowns would hit core earnings as third quarter revenue fell 9% due lower gaming income.
FTSE 100 - Risers
Evraz (EVR) 373.30p 3.54%
Antofagasta (ANTO) 1,055.50p 0.86%
NATWEST GROUP PLC ORD 100P (NWG) 116.30p 0.74%
Kingfisher (KGF) 321.40p 0.41%
Aveva Group (AVV) 4,500.00p 0.33%
Polymetal International (POLY) 1,758.00p 0.26%
Taylor Wimpey (TW.) 115.35p 0.17%
Land Securities Group (LAND) 540.70p 0.17%
Sainsbury (J) (SBRY) 204.40p 0.15%
Pennon Group (PNN) 1,000.50p 0.10%
FTSE 100 - Fallers
International Consolidated Airlines Group SA (CDI) (IAG) 100.45p -5.99%
Melrose Industries (MRO) 127.30p -5.32%
GVC Holdings (GVC) 970.00p -5.22%
Compass Group (CPG) 1,144.50p -4.74%
Fresnillo (FRES) 1,275.00p -4.35%
Homeserve (HSV) 1,169.00p -3.71%
Avast (AVST) 494.00p -3.70%
Just Eat Takeaway.Com N.V. (CDI) (JET) 9,400.00p -3.69%
Vodafone Group (VOD) 106.56p -3.46%
Intermediate Capital Group (ICP) 1,278.00p -3.40%
FTSE 250 - Risers
Cineworld Group (CINE) 32.40p 14.08%
AO World (AO.) 335.50p 6.34%
Caledonia Investments (CLDN) 2,735.00p 3.60%
Dixons Carphone (DC.) 107.70p 3.16%
Marks & Spencer Group (MKS) 95.10p 2.74%
Ibstock (IBST) 169.00p 2.74%
Hill & Smith Holdings (HILS) 1,200.00p 2.55%
Softcat (SCT) 1,177.00p 2.53%
4Imprint Group (FOUR) 2,075.00p 2.44%
BMO Commercial Property Trust Limited (BCPT) 62.50p 2.12%
FTSE 250 - Fallers
Network International Holdings (NETW) 247.80p -20.32%
Centamin (DI) (CEY) 131.30p -19.20%
Meggitt (MGGT) 289.30p -5.43%
TUI AG Reg Shs (DI) (TUI) 288.90p -4.84%
IWG (IWG) 270.60p -4.11%
Just Eat Takeaway.Com N.V. (CDI) (JET) 9,400.00p -3.69%
Petropavlovsk (POG) 28.90p -3.67%
Aston Martin Lagonda Global Holdings (AML) 48.28p -3.44%
Man Group (EMG) 113.90p -3.39%
easyJet (EZJ) 505.00p -3.30%