- FTSE 100 rises 30 points
- European Commission releases “no-deal” contingency measures
- Foreign Secretary Dominic Raab plays down fears of food shortages and price increases
11.30am: European Commission announces logistic contingency measures in case of no-deal Brexit
The European Commission has released a set of targeted contingency measures in case a Brexit deal is not reached.
The measures are designed to ensure basic reciprocal air and road connectivity between the EU and the UK, as well as allowing for the possibility of reciprocal fishing access by EU and UK vessels to each other’s waters.
The aim of these contingency measures is to cater for the period during which there is no agreement in place. If no agreement enters into application, they will end after a fixed period, the European Commission said.
The EU has published contingency measures that keep trucks, trains and planes moving in a No Deal exit. But guess what? They require to Britain uphold a “level playing field” including subsidy controls – the same principle it is willing to sink a deal over… pic.twitter.com/0Siyp5ElVi
— Matthew Holehouse (@mattholehouse) December 10, 2020
Meanwhile, in the House of Commons, MPs are discussing the Brexit negotiations.
Paymaster General and Cabinet Office Minister Penny Mordaunt said it was clear “we remain far apart on the so-called on the so called level playing field, fisheries and governance” but said she was still optimistic that a deal could be secured.
Earlier, the Foreign Secretary Dominic Raab conceded that failure to strike a trade deal with the EU would cause “some bumps along the road” but gave short shrift to the suggestion, made by Tesco chairman John Allan, that food prices could rise by 5% in the event of no deal being secured.
“Of all the things that will be a challenge, I am not concerned about either supermarket cupboards running bare or the cost of food prices,” Raab said in a radio interview.
The Brexit brinkmanship does not seem to be having much negative effect on the share prices of blue-chip equities, judging by the performanece of the FTSE 100.
The Footsie was up 39 points (0.6%) at 6,603, with the advance led by packaging firm DS Smith PLC (LON:SMDS) after its half-year results this morning.
The shares rose 4.0% to 372.9p despite the company reporting a 54% decline in half-year profit before tax. The FTSE 100 company has resumed dividend payments with a 4p interim divi.
“DS Smith saw strong demand for packaging as a result of the surge in online shopping but it seems odd that it is re-starting making dividend payments when revenues and profit are weaker. It appears like a strategy to keep shareholders onside,” said CMC’s David Madden.
10.10am: Ocado fails to meet high expectations with trading statement
The latest survey from the Royal Institution of Chartered Surveyors (RICS) showed a barely perceptible cooling in the housing market.
The net balance of surveyors reporting that house prices have risen over the last three months fell to +66 in November, from +67 in October, but was ahead of the consensus forecast of +63.
The balance is calculated by subtracting the percentage of respondents reporting a fall in house prices from the percentage reporting a rise.
“The housing market remains in a sweet spot, thanks to the government’s decision in July to lift the threshold for stamp duty to £500K, from £125K, until the end of March,” said Samuel Tombs, the chief UK economist at Pantheon Macroeconomics.
“The number of home sales per surveyor climbed to 19.1, from 18.1 in October, thereby greatly exceeding its 13.0 average last year. The new buyer enquiries balance declined to +27 in November, from +42 in October, but as it is technically an indicator of month-on-month growth in demand, it is likely that house purchase mortgage approvals will remain near October’s 13-year high. Indeed, Google Trends data indicate that visitor numbers to property websites have remained 30% above their level a year ago in December,” Tombs said.
“Housing market activity, however, looks set to fall sharply from April onwards, if the government sticks to its plan to end the stamp duty holiday and does not set up a new mortgage guarantee scheme, as the Prime Minister has mooted recently. The rapid rollout of the vaccine should mean that most people are happy once again with their pre-Covid housing decisions. Meanwhile, mortgage rates for high LTV [loan-to-value] loans likely will remain well above last year’s level, as lenders price-in a greater risk that loans will turn sour during a period of high unemployment, choking off demand from first-time buyers. Accordingly, we currently expect house prices to fall by about 2% over the course of 2021, following a 6% rise during this year, if government policies do not change,” Tombs said.
The FTSE 100 was up 39 points (0.6%) at 6,603 but no thanks to housebuilders; Persimmon PLC (LON:PSN) was down 2.9% at 2,608p and Barratt Developments PLC (LON:BDEV) was 2.6% weaker at 614.2p.
Mortgage lender Lloyds Banking Group PLC (LON:LLOY) was 3.4% softer at 35.98p, making it the second-worst blue-chip performer after Occado Group PLC (LONtrading statement covering the 13 weeks to November 29.
“It’s no surprise to see that Ocado’s full-year profit forecast is set to double the previous year. The lockdown restrictions have confirmed the earlier trends that we saw around Spring time which showed positive sales growth for direct to consumer and supermarket companies. Indeed we have already seen a significant shift in consumer behaviour which has boosted growth for those companies in Q2 and to a lesser extent in Q3 but which now look to boost growth again in Q4. Ocado’s sales and earnings growth will depend on customers’ shopping habits but we are likely to see more of the same again in early 2021,” suggested Mark Lynch, a partner at corporate finance house, Oghma Partners.
“We are sadly likely to see more long term problems for Food to Go and food service providers that are unable to service clients as per normal – the sad fact is that the longer the restrictions are imposed the more end user businesses will go bust. This includes pubs, restaurants and the more food service manufacturing capacity and, to a lesser extent, Food to Go capacity we will see taken out of the market. The consumer market as we knew it is unlikely be the same ever again,” predicted Lynch.
Ocado shares were down 4.9% at 2,211p.
9.50am: UK posts in-line trade deficit in October
The UK total trade surplus, excluding non-monetary precious metals, decreased by £6.5bn to £0.8bn in the three months to October 2020.
Imports grew by £14.3bn and exports grew by a £7.8bn.
The decrease in the total trade surplus was driven by an increase in the trade in goods deficit; the underlying trade in goods deficit widened by £6.6bn to £29.1bn in the three months to October 2020, the Office for National Statistics said.
For the month of October alone, the total trade deficit widened by £0.9bn to £1.6bn, with imports rising by £0.4bn and exports falling by £0.5bn. The trade deficit was in line with economists’ expectations.
The FTSE 100 was up 41 points (0.6%) at 6,605.
9.20am: UK GDP rises in October
UK gross domestic product (GDP) grew by 0.4% in October, meaning GDP was 23.4% than its April 2020 low.
On the other hand, it was 7.9% below February’s pre-pandemic level.
The services sector grew by 0.2% in October while the production sector grew by 1.3% and the construction sector by 1.0%.
“It’s hard to keep pace with the rollercoaster of restrictions in the UK and consequently, the economic impact. With October seeing a host of tiered restrictions, the slowdown in GDP growth is to be expected. Fast forward to now, England has headed back into localised rules following the second national lockdown, which is inevitably likely to cause a contraction in November’s data print as shops and restaurants once more closed their doors; however, sectors such as manufacturing and construction are emerging from this lockdown in much better shape than they did in March, and December’s GDP should reflect a boost from retail and hospitality in the run up to Christmas,” said Robert Alster, the chief investment officer at Close Brothers Asset Management.
“This is all against a background of tense Brexit negotiations and the potential ramifications of the deal, or no deal, whichever form it takes. With the OECD warning of a serious short term hit to the UK economy, concerns are already being flagged around possible food shortages and price rises following January 1st ; however, with vaccines in the process of being rolled out, there is light at the end of the tunnel as we reach the end of a truly tumultuous year,” he added.
The FTSE 100 was up 35 points (0.5%) at 6,599.
8.45am: Brexit brinkmanship remains in focus
The FTSE 100 defied early predictions to open up in positive territory.
However, the mood remained subdued in the wake of Boris’ posh ‘fish supper’ with Ursula von der Leyen, the president of the European Commission.
Make-or-break negotiations will continue over the next four days between the UK and EU in a bid to hammer out a trade deal.
However, both sides warned there were still significant gaps to be traversed before an accord can be struck with the ‘no deal’ option looking the most likely outcome.
The pound reflected the general pessimism as it dropped 0.7% to US$1.3305.
Profit-takers cut their positions in Ocado (LON:OCDO), the online grocer that fell 3.5% early on, after yet another strong update to its trading fundamentals.
Traders couldn’t be blamed for ‘top-slicing’ after a run that has seen the group more than double in value in the last nine months.
Higher crude oil prices (albeit a rise from fairly weak levels) provided a 2% boost to Shell (LON:RDSA).
A stronger than expected showing from retail conglomerate Frasers Group (LON:FRAS) saw its shares rocket 11%.
6.44 am: Slow start predicted
The FTSE 100 is set to start Thursday slightly lower as the clock continues to tick closer to the end of the year and the Brexit transition deadline.
CFD and spread betting firm IG Markets sees London’s bluechip benchmark down around 11 points, making the price 6,562 to 6,565 with just over an hour to go until the open.
Attentions pointed in the direction of Brussels and the very last-minute discussions which are ongoing.
“The fact that Prime Minister Boris Johnson felt it worthwhile to travel to Brussels to dine with EU Commission President Ursula Von Der Leyen, does offer some hope that there will be a positive outcome from what have been some tortuous negotiation,” said Michael Hewson, analyst at CMC Markets.
The analyst added: “Yesterday German Chancellor Angela Merkel set out the EU’s red lines, saying that Brussels would accept a no deal outcome if the two sides could not figure out a way to overcome this key obstacle.
“What is becoming increasingly clear is that while there is an acceptance that there could be some level of regulatory divergence, it is the arbitration mechanism to resolve any issues that is at the core of the impasse, and where attention really needs to be focussed.
“With time running out the urgency couldn’t be more immediate with very little time to avoid a no deal scenario on the 31st December.”
In the United States, meanwhile, Wall Street stock indices all fell on Wednesday as Republicans and Democrats continue to play political football with an evidently much needed economic stimulus package.
The Dow Jones was down 105 points or 0.35% to close at 30,068 whilst the S&P 500 gave up 0.79% to finish the session at 3,672.
The Nasdaq fell furthest, losing 243 points or 1.94% to finish Wednesday at 12,338.
In Asia, Japan’s Nikkei was trading 61 points or 0.23% lower at 26,756 whilst Hong Kong’s Hang Seng slipped 134 points or 0.51% to 26,371. The Shanghai Composite meanwhile traded just a sliver lower at 3,370.
Around the markets
Pound: US$1.3358, down 0.31%
Gold: US$1,837 per ounce, up 0.04%
Silver: US$23.92 per ounce, up 0.11%
Brent crude: US$49.00 per barrel, up 0.32%
WTI crude: US$45.74 per barrel, up 0/3%
Bitcoin: US$18,338, up 0.69%
6.45 am: Early Markets: Asia / Australia
Asia-Pacific shares traded lower today following overnight declines on Wall Street as investors watched Brexit trade talks and the ongoing negotiations in the US for a COVID-19 relief package.
In Japan, the Nikkei 225 declined 0.23% while South Korea’s Kospi was 0.33% lower.
Hong Kong’s Hang Seng index shed 0.54% and in China, the Shanghai composite struggled for direction, last trading down 0.02%.
Australia’s benchmark ASX 200 closed 0.67% lower, making it the index’s first decline in eight sessions.
Proactive Australia news:
PNX Metals Ltd (ASX:PNX) (FRA:4P1) has signed a non-binding term sheet with Ausgold Trading Pty Ltd to acquire the Glencoe Gold Deposit in the Northern Territory for total staged consideration of $1.875 million.
Bardoc Gold Ltd (ASX:BDC) (FRA:4SF) has taken another key step towards the financing and development of its flagship 100%-owned Bardoc Gold Project in WA, entering into a binding agreement with leading global minerals trader MRI Trading AG for the sale of gold concentrates.
Kazia Therapeutics Limited (ASX:KZA) (NASDAQ:KZIA) (FRA:NV9) has executed a Letter of Intent with the Pacific Pediatric Neuro-Oncology Consortium (PNOC) to launch a clinical trial of multiple therapies, including Kazia’s investigational new drug, paxalisib (formerly GDC-0084), in diffuse midline gliomas including diffuse intrinsic pontine glioma (DIPG).
Blackstone Minerals Ltd (ASX:BSX) (OTCMKTS:BLSTF) (FRA:B9S) has delivered some of the best intercepts to date at King Cobra along with further strong results from Ban Chang, both of which form part of the flagship Ta Khoa Nickel-Copper-PGE project in Vietnam.
Twenty Seven Co Ltd (ASX:TSC) (FRA:U9V) has signed a binding terms sheet with Revolution Mining Pty Ltd for the acquisition of two additional exploration licences adjoining the Yarbu Gold Project in the highly prospective Marda-Diemals greenstone belt in Western Australia.
Roots Sustainable Agricultural Technologies Limited (ASX:ROO) has secured firm private placement commitments from institutional, professional and sophisticated investors to raise up to A$3,955,851 before costs, which will allow it to aggressively pursue global cannabis opportunities.
Calima Energy Ltd (ASX:CE1) (FRA:R1Y) has received preliminary findings from an in-depth industry study of three wells drilled in 2019 confirming that the liquids-rich Montney fairway extends further north than previously thought.
Netlinkz Ltd (ASX:NET) expects to beat its 2020 guidance of $15.3 million, with receipts from customers expected to be approximately $17 million.
engage:BDR Ltd (ASX:EN1) has raised $1,189,650 in a strongly supported share purchase plan aimed at driving growth in the CTV (Connected TV) and advertising realms.
FYI Resources Ltd (ASX:FYI) (FRA:SDL) in collaboration with Alcoa Australia Ltd will begin a trial of FYI’s wholly-owned high purity alumina (HPA) pilot plant at Welshpool in Western Australia today.