London midday: Stocks rally as sterling drops on Brexit woes
London stocks had extended gains by midday on Wednesday, lifted by a weaker pound as investors eyed minutes from the US Federal Reserve's latest meeting.
The FTSE 100 was up 1% at 7,199.12, with the pound down 0.4% against the dollar and the euro to 1.2124 and 1.0923, respectively, as Prime Minister Boris Johnson was set to meet German Chancellor Angela Merkel later in the day to discuss Brexit, among other things.
Sterling briefly spiked higher on Tuesday after Merkel said she would consider "practical" solutions on the Irish backstop. It had fallen earlier in the day after EU officials dismissed Johnson's attempts to re-negotiate Brexit and scrap the backstop.
Monex Europe said: "The chances of a breakthrough seem slim, but given Boris yesterday hinted at Britain being willing to make 'commitments', and Merkel said that the Irish backstop could be bypassed by a practical solution, there is at least a glimmer of hope for good news today."
Away from Brexit, investors were looking ahead to the release of minutes from the Fed's July meeting, which are due out at 1900 BST.
London Capital Group analyst Jasper Lawler said: "The next move by the market depends greatly on what the Fed will do with interest rates. Given the current climate, the markets are ultra-sensitive to the Fed’s outlook meaning that the FOMC minutes could be scrutinised more closely than usual. The market is fully pricing in a 25-basis point rate cut for the September meeting and a 50 point basis rate cut by the end of the year."
Lawler said investors will be looking for acknowledgement that downside risks have increased.
"However, importantly, the FOMC meeting was prior to the most recent escalation in US-Sino trade dispute and prior to the bond market flashing strong recession warning signals. With this is mind, the minutes could be slightly more hawkish relative to current market pricing."
In equity markets, travel company TUI was the standout gainer, closely followed by luxury fashion brand Burberry.
Credit-checking firm Experian gained as it announced the acquisition of Look Who's Charging (LWC), an Australian provider of transaction enrichment and categorisation technology to banks, for an undisclosed sum.
Victrex was up after an upgrade to 'equalweight' from Barclays, which highlighted 20% upside risk to consensus 2021 earnings per share estimates. Outsourcer Capita was boosted by an upgrade to 'buy' from 'neutral' at Goldman Sachs and Tullow Oil was lifted by an upgrade to 'buy' from 'speculative buy' at Canaccord Genuity.
On the downside, miners retreated amid falling base metals prices, with BHP, Anglo American and Rio Tinto all lower.
OneSavings Bank was trading down as it reported a rise in interim profit ahead of its merger with rival Charter Court Financial, as the loan book grew amid high demand from its core market segment, but a drop in the net interest margin. The company also said it had tightened its underwriting criteria "in light of the current macroeconomic outlook".
Charter Court Financial was also on the back foot after its first-half results, which showed a drop in pre-tax profit.
Market Movers
FTSE 100 (UKX) 7,199.12 1.04%
FTSE 250 (MCX) 19,164.68 0.82%
techMARK (TASX) 3,836.66 0.99%
FTSE 100 - Risers
TUI AG Reg Shs (DI) (TUI) 786.80p 3.44%
Burberry Group (BRBY) 2,170.00p 2.89%
Smurfit Kappa Group (SKG) 2,468.00p 2.66%
Hargreaves Lansdown (HL.) 1,964.00p 2.56%
Smith (DS) (SMDS) 330.40p 2.55%
RSA Insurance Group (RSA) 538.00p 2.52%
Flutter Entertainment (FLTR) 6,582.00p 2.30%
Schroders (SDR) 2,745.00p 2.23%
British Land Company (BLND) 490.70p 2.23%
CRH (CRH) 2,662.00p 2.19%
FTSE 100 - Fallers
Phoenix Group Holdings (PHNX) 654.30p -0.79%
BHP Group (BHP) 1,721.60p -0.76%
Royal Bank of Scotland Group (RBS) 183.80p -0.38%
Admiral Group (ADM) 2,170.99p -0.18%
Rio Tinto (RIO) 4,003.00p -0.16%
Centrica (CNA) 64.51p -0.11%
Tesco (TSCO) 215.48p -0.10%
Anglo American (AAL) 1,715.40p -0.06%
United Utilities Group (UU.) 776.00p 0.05%
Just Eat (JE.) 772.80p 0.10%
FTSE 250 - Risers
Victrex plc (VCT) 1,999.00p 5.43%
Entertainment One Limited (ETO) 435.80p 5.37%
Marston's (MARS) 124.08p 4.79%
Tullow Oil (TLW) 214.40p 3.73%
Cairn Energy (CNE) 168.50p 3.56%
Countryside Properties (CSP) 300.80p 3.51%
Ted Baker (TED) 936.50p 3.48%
Amigo Holdings (AMGO) 157.36p 3.39%
Balfour Beatty (BBY) 218.60p 3.11%
Grafton Group Units (GFTU) 707.50p 2.83%
FTSE 250 - Fallers
Wood Group (John) (WG.) 407.40p -5.34%
Woodford Patient Capital Trust (WPCT) 41.70p -4.69%
Charter Court Financial Services Group (CCFS) 278.00p -4.63%
OneSavings Bank (OSB) 340.00p -4.33%
Kaz Minerals (KAZ) 393.30p -4.07%
PayPoint (PAY) 890.00p -2.09%
CYBG (CYBG) 139.50p -1.48%
Ferrexpo (FXPO) 216.60p -1.41%
Convatec Group (CTEC) 178.25p -1.22%
Mitchells & Butlers (MAB) 346.00p -1.14%