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News

UK-EU deal hopes lift European mood, sterling flies

CMC Markets

Increased chatter than the UK and the EU will reach a trade deal has boosted sentiment. 

Europe

Equity markets were already up on the session in advance of the optimism surrounding the trade talks, so then the bullish move was turned up a notch. The Covid-19 crisis is still very much in the news but for now traders are fixated on the UK-EU situation. On the London market, banks, housebuilders, airlines and transport stocks are showing decent gains. The FTSE is seeing its gains capped by the rise in the pound – which has pushed internationally focused stocks like Reckitt Benckiser, AstraZeneca and Diageo into the red.           

Cairn Energy shares are the biggest risers on the FTSE All Share index today. Cairn was in a legal dispute with the Indian government because of tax and the arbitration case found in favour of the London-listed company and it awarded Cairn $1.2 billion in damages. It was found that the Indian government was in breach of the UK-India bilateral investment treaty.

Marston’s will take over the running of 156 Brains pubs in Wales. The entire pub sector has been under intense pressure because of the pandemic and Brains were particularly feeling the pain so that’s why they struck a deal with Marston’s. No monetary amount was mentioned but the transaction will give Brains some breathing space. Marston’s said the new arrangement will not impact its plans to reduce borrowings below £1 billion by 2024. Peel Hunt upped its price target from Marston’s from 95p to 105p. 

Sage continues to sell off non-core assets. This morning the company announced that it plans to spin off its businesses in Asia and Australia for roughly £95 million. The deal should be completed in the next six months. A few weeks ago the company revealed that it will sell off its operation in Poland for £66 million. The latest set of full year results showed that profit margins were squeezed but the company was investing it cloud computing, which is a rapidly expanding business.

Land Securities, the real estate investment trust, will sell off a 75% stake in three West End properties to Allianz Real Estate for just over £400 million. Land wants to focus on core assets and since the start of 2020, it has disposed of £1.1 billion worth of assets.             

US

The mood is a little subdued in the US as it seems there is a holdup on the $900 billion coronavirus stimulus package. The lower and upper houses of government have voted in favour of the $900 billion scheme but President Trump has indicated he will not support the plan. It is understood that Mr Trump is keen for a package that includes a $2,000 stimulus payment, while the current proposal allows for a $600 payment.

Several economic indicators were posted today and overall it was a mixed bad. The personal spending and income readings were -0.4% and -1.1% respectively. Both showed declines on the month and undershot economists’ forecasts. On the other side of the coin, the initial jobless claims reading tumbled from 892,000 to 803,000.        

Nikola shares are in the red after it was announced that its collaboration with Republic Services to develop an electric refuse truck has ended. The CEO said that given the resources and investment required, it was the right decision for both companies to make.         

FX

There is increased optimism about the possibility of the UK-EU brokering a trade deal. One report circulated stating that a deal is ‘imminent’. In addition to that, it was stated that the EU is preparing for a deal with the UK. We have been down this road several times and there are no guarantees it will come to anything but perhaps the fact that time is running out is out has concentred the minds of policy makers. The CMC GBP Index is up over 0.9%.

 The US dollar index is in the red as it has handed back a large portion of yesterday’s gains. In addition to that, the optimism surrounding the British-European trade discussions has helped sterling and European equity markets, so there is a bit of a risk-on play impacting the dollar too.   

Commodities

Gold has been given a hand by the side in the US dollar. In recent months there has been a strong inverse relationship between the assets and that is playing out today.

WTI and Brent crude are up the session after two days of losses. The wider bullish trend in the markets is helping oil too. The EIA report showed that US inventories fell by 562,000 barrels, while the consensus estimate was for a decline of 3.1 million barrels.    


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