London pre-open: Stocks to open lower as pound gains on Brexit breakthrough
London stocks were set for a weaker open on Wednesday as the pound gained ground on news that a Brexit divorce bill has been agreed.
The FTSE 100 was expected to open 25 points lower at 7,435, as sterling ticked up 0.4% versus the dollar to 1.3395 and 0.3% against the euro to 1.1294. A stronger pound tends to dent the index as around 70% of its constituents derive most of their earnings from overseas.
According to reports, the UK government has said it is willing to pay a Brexit divorce bill of between €40bn and €55bn (£35bn to £49bn), which is more the €20bn Prime Minister Theresa May said she was prepared to commit to back in September.
CMC Markets analyst Michael Hewson said: "While agreeing a sum may be smart politics in trying to force the EU to the table to discuss trade there is no guarantee it won’t cause palpitations in certain parts of the Conservative party. It now remains to be seen having made the offer whether the discussion does in fact move in the direction of trade in order that the Irish border question can also be addressed in tandem in the coming months.
"While one obstacle looks to have been cleared it remains to be seen whether the Irish government will follow through on their threats to veto further progress unless certain guarantees are met with respect to the border issue."
On the data front, net lending, consumer credit and mortgage approvals are at 0930 GMT.
In corporate news, Cineworld Group is poised to make a $3.07bn (£2.3bn) offer for US peer Regal Entertainment, the UK cinema chain confirmed on Wednesday. Cineworld said it planned to fund the $23-per-share offer through new debt and by raising funds via a rights issue, which its 28% shareholder Global City Holdings has committed to a "full subscription".
London Stock Exchange said chief executive Xavier Rolet had left the company after weeks of wrangling over the terms of his departure. David Warren, LSE’s finance director, will take over immediately as interim CEO. LSE also said its chairman, Donald Brydon, would not stand for re-election to the board in 2019.
FirstGroup welcomed a new strategic vision for the Great Western rail network from the Department for Transport on Wednesday, with the DfT confirming it would exercise its option to extend First’s franchise in the region by one year, to 1 April 2020. The FTSE 250 passenger transport operator said the department also announced its intention to negotiate a direct award for the Great Western franchise for an extra two years to April 2022, with an option for an extension of up to two further years at the DfT’s discretion.
Property and household-related digital brands owner ZPG has agreed to acquire Netherlands-based automated property valuation and statistical market analysis firm Calcasa for €30m (£26.5m), it announced on Wednesday, on a cash-free, debt-free basis. The FTSE 250 company said the acquisition also included a performance-based earn-out of up to €50m, with completion of the acquisition expected to take place on 1 December.