London open: Stocks edge up, sterling rallies on Brexit talks extension

London stocks edged higher in early trade on Monday, underperforming their European peers as sterling surged on news that Brexit talks have been extended again, sparking hopes that an agreement can be reached.

At 0830 GMT, the FTSE 100 was 0.3% firmer at 6,565.56, while the pound was up 1.3% against the dollar at 1.3394 and 1% higher versus the euro at 1.1018 after the UK and EU agreed over the weekend to extend Brexit trade talks into this week, although British Prime Minister Boris Johnson said the two sides were “still very far apart” on key issues.

European Commission president Ursula von der Leyen said on Sunday that negotiators would “go the extra mile” to breach the impasse after what she described as a “useful” phone call with Johnson. Significantly no new deadline was set by either side as the Sunday zero hour for an end to talk came and went.

Meanwhile, EU Brexit negotiator Michel Barnier said earlier that agreeing a new trade pact with Britain was still possible and that negotiations are continuing as both sides look to resolve their differences over access to UK fishing waters and rules of economic fair play for companies.

“We’ve only been negotiating for nine months, we’ve needed at least five years for all the previous agreements, we are going to give every chance to this agreement… which is still possible,” Barnier told journalists in Brussels.

A stronger pound tends to dent the top-flight index, as around 70% of its constituents derive most of their earnings from overseas. The domestically-focused FTSE 250 was up 1.2% at 19,854.39.

FXTM said: “Traders seem optimistic that a deal will be achieved before the end of the transition period. However, this assumption may be costly, as a no-deal scenario remains highly possible. Expect volatility to increase over the next few days as we approach 31 December, because after this date the UK would automatically fall back into the rules of the World Trade Organization if there is no deal.

“The Bank of England will also be under pressure when monetary policymakers meet on Thursday. If there’s no deal by then, expect the central bank to signal sub-zero interest rates and further increase the asset purchase program. This is likely to put some pressure on the pound.”

In equity markets, housebuilders and banks were top gainers amid Brexit hopes, with Persimmon, Taylor Wimpey, Barratt, Lloyds, NatWest and Barclays all higher.

Plastic piping systems manufacturer Polypipe surged as it said annual profit would beat expectations after revenue rose 8% in November. Underlying operating profit for the year to the end of December will be about £40m, exceeding the consensus forecast range of £35m to £37m, the company said.

On the downside, pharmaceutical company AstraZeneca slumped after saying it was buying US drug developer Alexion in a cash and shares deal worth $39bn. Both companies have approved the deal, which still needs regulatory and shareholder approval. The deal is expected to close in the third quarter of 2021.

Market Movers

FTSE 100 (UKX) 6,565.56 0.29%
FTSE 250 (MCX) 19,854.39 1.18%
techMARK (TASX) 4,079.88 0.21%

FTSE 100 – Risers

Persimmon (PSN) 2,600.00p 5.56%
Lloyds Banking Group (LLOY) 35.92p 5.43%
Taylor Wimpey (TW.) 158.60p 5.35%
Barratt Developments (BDEV) 613.20p 5.11%
NATWEST GROUP PLC ORD 100P (NWG) 157.85p 4.99%
Barclays (BARC) 141.76p 4.19%
Berkeley Group Holdings (The) (BKG) 4,374.00p 4.12%
International Consolidated Airlines Group SA (CDI) (IAG) 162.10p 3.74%
Legal & General Group (LGEN) 253.40p 3.72%
JD Sports Fashion (JD.) 777.80p 3.46%

FTSE 100 – Fallers

AstraZeneca (AZN) 7,730.00p -5.27%
Fresnillo (FRES) 1,085.50p -3.60%
Polymetal International (POLY) 1,650.50p -3.14%
Ocado Group (OCDO) 2,148.00p -1.20%
Hikma Pharmaceuticals (HIK) 2,490.00p -1.19%
Experian (EXPN) 2,733.00p -1.09%
Reckitt Benckiser Group (RB.) 6,562.00p -1.09%
Scottish Mortgage Inv Trust (SMT) 1,135.00p -0.87%
Just Eat Takeaway.Com N.V. (CDI) (JET) 7,868.00p -0.73%
Unilever (ULVR) 4,390.00p -0.68%

FTSE 250 – Risers

Polypipe Group (PLP) 491.50p 7.55%
Crest Nicholson Holdings (CRST) 302.40p 7.31%
Dixons Carphone (DC.) 108.30p 6.49%
Bellway (BWY) 2,889.00p 6.29%
Vistry Group (VTY) 852.50p 6.23%
Redrow (RDW) 521.00p 5.64%
Virgin Money UK (VMUK) 132.80p 5.48%
easyJet (EZJ) 857.60p 4.82%
Capita (CPI) 47.46p 4.63%
Cineworld Group (CINE) 65.58p 4.39%

FTSE 250 – Fallers

888 Holdings (888) 268.00p -2.37%
TUI AG Reg Shs (DI) (TUI) 395.00p -2.08%
Centamin (DI) (CEY) 120.00p -1.92%
Centrica (CNA) 42.67p -1.82%
Hochschild Mining (HOC) 191.10p -1.60%
Alliance Trust (ATST) 890.00p -1.33%
Sabre Insurance Group (SBRE) 255.00p -0.97%
PureTech Health (PRTC) 312.00p -0.95%
Witan Inv Trust (WTAN) 212.50p -0.93%
Just Eat Takeaway.Com N.V. (CDI) (JET) 7,868.00p -0.73%

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