Fresh hopes of a Brexit deal fuel Boris bounce
BORIS Johnson once famously claimed he was ‘veering all over the place like a shopping trolley’ over Brexit.
That is not a bad metaphor for how markets are reacting to his talks with the EU, as traders closely follow every twist and turn. They piled into the pound and other British assets on Friday amid news that leaders had found ‘ a path to a deal’, whereas on Monday stocks sank after gloomier reports warned of slow progress.
Yesterday, shares were rebounding again after reports that the Prime Minister was finally ‘closing in’ on a deal.
Banking, housing and utility stocks – seen as having fortunes tied to the health of the economy – gained an instant lift, with British Land (up 5.5pc, or 32.2p, to
623p), United Utilities (up 5.3pc, or 43.2p, to 865.4p), Land Securities (up 6.1pc, or 54.2p, to 946p), Lloyds Banking Group (5.2pc, or 3.03p, higher at 60.82p) and Barratt Developments (up 5.1pc, or 33.4p, to 683p) among the biggest FTSE 100 risers.
Clydesdale Bank and Virgin Money owner CYBG saw its shares rise by 6pc, or 7.65p, to 134.35p too, while shopping centre owner
Hammerson rose 7.3pc, or 21.9p, to 322p. It also triggered a surge in sterling against the dollar, helping the currency climb to its highest level in five months.
But analysts warned the fraught nature of the talks meant further wild swings are ahead.
They have estimated the pound could go as low as $1.10 or as high as $1.40, depending on whether an agreement can be reached.
Fiona Cincotta at City Index said: ‘ Traders will remain glued to headlines, which are the exclusive driver of the pound right now.’
The FTSE 100 closed almost flat, dipping 0.03pc, or 1.81 points, to 7211.64 but the more domestically-focused FTSE 250 rose 1.3pc, or 267.07 points, to 20,196.97.
The fresh optimism was dampened by downbeat trading updates, including from industrial furnace and ovens maker Vesuvius and engineering giant Renishaw.
Vesuvius plunged by 18.1pc, or 75.4p, to 341p after it warned of tough market conditions, exacerbated by the US-China trade war which is damaging the steel and car industries.
Full- year profits were now expected to be between £180m and £190m, down from an earlier estimate of £197.2m.
Renishaw saw its shares tumble after bosses unveiled a whopping 85pc fall in first- quarter profits, blaming turmoil in the world economy. The Gloucester company said its profits were just £5.1m in the three months to September 30, compared to £33.5m a year earlier. That was after revenues fell from £154m to £124.6m.
Renishaw, which has expertise in machinery used for everything from brain surgery to jet engines, also warned: ‘Trading conditions are expected to remain challenging’ – a prognosis that triggered a sell-off. Shares fell 6.9pc, or 244p, to 3316p. Embattled drug company Indivior, which told investors it was hiking its full-year forecast after its best- selling opioid addiction drug, suboxone, was not hit as badly as feared by competition from new ‘copycat’ rivals.
Profits are now expected to range between £127m and £150m, up from the previous forecast of £63m-£103m. Shares lifted 4.1pc, or 2.03p, higher to 51.42p.
Finally, Whitbread rose 2.6pc, or 109p, to 4279p after analysts at UBS said fears about a slump in hotel room revenue had been exaggerated. They upgraded the firm from ‘neutral’ to ‘buy’, claiming the doom-mongering was ‘too conservative’, and said it was wellpositioned to grow.