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Sterling and banks under cosh over Brexit

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RBS Gogarburn

4.30pm: London closes lower amid Brexit uncertainty

Trading in the last session before Sunday’s new Brexit deadline ended with the FTSE 100 down 53.01 points at 6,546.75 as the banks felt the brunt of sterling’s fall.

The pound continued to slip, reaching an 11-week low against the euro. It has fallen 2% this week.

Natwest Group (RBS), Barclays, and Lloyds Banking Group all registered large drops with Natwest shares, down 6.67%, showing the biggest loss amid concerns that the sector will be hard hit by a No deal Brexit.

Morgan Stanley said earlier that bank shares could fall by up to 20% and the domestically-focused FTSE 250 by 10%, if the UK and EU fail to reach agreement.

It said that markets had been buoyed by expectations of a trade deal but were now pricing in the likelihood of the UK crashing out of the EU on 31 December without an agreement. That would be accompanied by a fall in sterling.

By contrast, the FTSE 100 may rise as it is made up largely of companies with significant overseas earnings. UK banks stocks would be the exception as they are more closely correlated to sterling. They would also suffer from a cut in interest rates.

Noon: Self-isolation changes

From Monday 14 December, the self-isolation period is reducing from 14 to 10 days if you are a close contact of someone who has tested positive for coronavirus or have travelled into Scotland from a non-exempt country.

The UK-wide move will follow Wales which made the change yesterday.

10.30am: Heathrow terminal shuts

Heathrow’s Terminal 4 will remain closed until the end of next year as the pandemic continues to disrupt travel.

The airport’s owner said passenger numbers fell 88% in November as travel restrictions and a second lockdown took their toll.

Based on forecasts and current traffic, it said it would extend the closure of Terminal 4 until the end of 2021.

Heathrow shut the terminal in May during the first national lockdown.

London Stock Exchange

9am: Markets factor in No Deal

“A no-deal Brexit is starting to be factored in by the markets after Boris Johnson warned the country to prepare for such an outcome with sterling coming under renewed pressure,” says AJ Bell investment director Russ Mould.

“It remains hard to determine how much of this is the usual brinkmanship around negotiations – EU agreements often go right to the wire after all.

“Ultimately we’ll only really know for sure when both sides stop negotiating – with some apparent wiggle room over the latest ‘deadline’ set for Sunday.

“The fall in the pound isn’t lifting the FTSE 100 for once. That decline in index is down to mixed trading in Asia and weakness across Europe. For all the focus on Brexit, Covid hasn’t gone anywhere either and there has been some slightly less positive news on vaccines of late.”

8.10am: London lower

The FTSE 100 was trading 20.85 points lower at 6,578.91.

8am: New trade deals

The UK has signed a continuity free-trade agreement with Vietnam the day after agreeing a deal with Singapore.

Trade secretary Liz Truss, who is in south east Asia, said: “Both these agreements are vital for the UK’s future as an independent trading nation. 

7am: Rolls-Royce restructuring

Rolls-Royce

Rolls-Royce CEO Warren East said rapid progress has been made on the restructuring programme at the aero engine maker and the consolidation and reorganisation of the civil aerospace footprint is well underway.

More than 5,500 roles will have been removed by the year end, ahead of the prior expectation of over 5,000, with a significant proportion achieved through voluntary severance.

It said it was sticking to its guidance to turn cash flow positive during the second-half of next year.

“In recent months, we have seen some early indications of order intake levels picking up,” he said in a trading update. 

Virgin Media

Virgin-O2 merger referred

The proposed merger of Virgin Media and Virgin Mobile with O2 will be investigated by the Competition and Markets Authority.

The move comes after Virgin and O2 requested that the Competition and Markets Authority (CMA) move quickly to the in-depth Phase 2 stage of its review through a ‘fast-track’ process.

Bellway sees strong demand

In an update ahead of its AGM, housebuilder Bellway said it was seeing strong underlying demand for new homes, with a 6% increase in the reservation rate to 210 per week (1 August 2019 to 24 November 2019 – 199 per week).

The forward sales position is substantial, with an order book comprising 6,186 homes (24 November 2019 – 5,770 homes) and a value of £1,766.7 million (24 November 2019 – £1,488.6 million).

As previously announced, the board is recommending a final dividend of 50p per share (2019: 100p per share).

Jason Honeyman, chief executive, said: “Bellway is in a robust position and notwithstanding the recent widespread ‘lockdown’ restrictions throughout the country, sales demand is encouraging, and the order book is strong. 

“We have substantial cash resources, considerable ability to continue investing in land and with our solid operational structure, we are determined to return the group to its strategy of delivering long-term and sustainable growth.”

Markets

London’s FTSE 100 is set to open little changed, in line with sterling, which has stabilised on foreign exchange markets.

US markets eased yesterday with the Dow Jones industrial Average 70 points lower and the S&P 500 off 5 points after US weekly jobless claims rose to 853,000, which was well above the consensus forecast of 725,000.

Japan’s Nikkei 225 and the Hang Seng in Hong Kong have gone their separate ways; the former is down 86 points and the latter is 106 points higher.

Airbnb soars on debut

San Francisco-based Airbnb, the lettings marketplace that has changed the way the world books holidays and property lettings, defied the travel downturn with a hugely successful IPO that saw its shares rocket. Some shares were trading at over double the launch price.

Airbnb and its investors sold about 52 million shares for $68 each after marketing them for $56 to $60 apiece. At that price, it has a fully diluted value of about $47bn, which includes employee stock options and restricted stock units.



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