The pound’s weakness has pushed the UK stock market higher, with the FTSE 100 up 35 points at 6599, a gain of 0.5%.
Multinational companies are among the risers, including tobacco firm Imperial Brands (+2.2%), pharmaceutical maker Hikma (+2.3%) and medical implants firm Smith & Nephew (+2.2%).
Cardboard maker DS Smith is up 2.6%, after resuming its dividend after a jump in demand for packaging for e-commerce orders during the pandemic. It warned, though, that “the economic and political environment remains uncertain due to Covid-19 and Brexit”.
Some UK-focused companies are down, with banks Lloyds (-4.3%) and Barclays (-3.3%) among the fallers, along with housebuilders Persimmon (-3.4%) and Barratt (-2.8%).
Pound drops as no-deal worries rise
In the financial markets, the pound has dropped further against the US dollar and the euro as fears of a no-deal Brexit cliff-edge mount.
Sterling has dropped by nearly a cent to around $1.33, and is down almost a eurocent at €1.099, after last night’s turbot-charged dinner between Boris Johnson and Ursula von der Leyen resulted in a new Sunday deadline.
Russ Mould, investment director at AJ Bell. says:
“This reaction suggests the market is losing confidence in Boris Johnson being able to strike a deal and so currencies and equities are likely to be volatile for both today and tomorrow in anticipation of this weekend’s conclusion to the drawn-out negotiations.
So far today, UK foreign secretary Dominic Raab has said the EU needs to make ‘substantial movement’ on the outstanding issues (fisheries, and level playing field commitments).
The EU, though, has just proposed several contingency measures in case of a no-deal Brexit, covering air connectivity, aviation safety, road connectivity and fisheries.
Von der Leyen warns:
There is no guarantee that if and when an agreement is found it can enter into force on time. We have to be prepared including for not having a deal in place on 1 January.
Our Politics Live blog has all the details:
GAM: Outlook for the UK economy looks precarious.
The UK faces a “precarious” economic outlook as the pandemic hits confidence and Brexit trade deal talks continue, warns Charles Hepworth, investment director at GAM Investments:
He says October’s slowdown shows the impact of lockdown measures – which could see the UK economy shrink again this quarter:
As lockdown restrictions resurfaced across much of the UK in the fourth quarter, the effects have started to show already in October’s monthly GDP print, which posted a 0.4% advance against the 1.1% advance we saw in September. The general expectation is for a Q4 contraction in GDP as a whole as the economy continues to deflate from the record June growth rate as we bounced out of the first wave of the pandemic.
“This monthly print shows the continual damaging effects of the pandemic, sapping any consumer and business confidence and now the UK economy is nearly 8% smaller than it was in January this year. As talks continue between Prime Minister Boris Johnson and the EU President von der Leyen, with the deadline to reach an agreement further extended to this Sunday, the outlook for the UK economy looks precarious.
The Prime Minister was perhaps too characteristically upbeat when he said just a month ago that the next few months are going to be ‘bumpy’.”