Stocks and sterling buck up as confidence climbs
SHARES rallied and the pound surged to its highest level since 2018 as hopes grew that the UK could be on the cusp of striking a Brexit deal.
The City was buzzing after EU Commission president Ursula von der Leyen said there ‘is a path to agreement now’ even if it ‘may be very narrow’, fuelling anticipation that an agreement on new trade terms is imminent.
The two sides have ‘found a way forward on most issues’, she said, though fisheries and competition rules are still sticking points. Downing Street said last night that a No Deal is still the most ‘likely outcome’ when the transition period ends on December 31.
But those sombre comments did little to dampen the excited mood among traders.
The FTSE 100 climbed 0.9pc, or 57.59 points, to 6570.91, while the FTSE 250 rose 1.2pc, or 244.17 points, to 20,096.56.
Stocks linked to the health of the UK economy such as housebuilders, financial groups and insurers were among the top risers on the FTSE 350.
Pensions and savings giant M&G rose 4.3pc, or 8.25p, to 198.8p, while Barratt Developments surged 4.6pc, or 28.8p, to 650p and Legal & General added 2.6pc, or 6.36p, to close at 260.4p.
Sterling touched a day-high of $1.3554 – the strongest rate since May 2018 – but retraced some of its step to trade at $1.3502. The rise comes just a week after sterling hit one-month lows as No Deal seemed imminent over the weekend, only for negotiations to be extended once again.
Kit Juckes, FX strategist at Societe Generale, said: ‘The level playing field is the big issue, fishing is emotive and a distraction which most people believe can be solved. Traders aren’t concentrating on the fisheries.’
Juckes believes that, with a deal, the pound could quickly race to $1.40 or higher in the New Year, though it could tumble below $1.25 without an agreement.
Although the wider market had a good day, business supplier Bunzl tumbled to the bottom of the Footsie leaderboard as it warned it had limited ‘visibility’ on trading next year.
Demand for personal protective equipment has driven an 8pc rise in annual sales at the group, which supplies products that companies need but do not sell to customers, such as toilet rolls, plastic cutlery and cleaning supplies.
It has also continued its takeover spree, snapping up Canadian cleaning product group Snelling f or an undisclosed sum. But uncertain investors sent shares 3.7pc lower, down 91p, to 2385p.
G4S’s spurned suitor, Canadian rival Garda World, l ast night extended its 235p a share bid to buy the company until January 6, in a sign it could table a higher offer and kick off a bidding war.
Another company, Allied Universal, has already agreed to buy the world’s biggest security guard provider for 245p a share.
Garda released its announcement after the market had closed. G4S had earlier closed down 0.5pc, or 1.2p, to 253.8p.
Information and analytics group Ascential, on the other hand, received a better reception to takeover news. It rose 2pc, or 7.4p, to 375.6p after it struck deals to buy ecommerce agencies in Brazil and China. And shareholders in sausage maker Cranswick welcomed confirmation that it is sniffing around pet food business Inspired Pet Nutrition. Shares rose 2.5pc, or 88p, to 3562p.
Oilfield services group Petrofac took a beating after it said this year’s oil price crash would hammer profits and wipe out a quarter of its turnover. The firm expects to bring in £3bn this year, down from £4.1bn in 2019. Shares fell 5.6pc, or 9.75p, to 163.15p.