Markets optimistic on a Brexit resolution and US-China trade talks
The pound rose against the dollar and euro but traders remain cautious
The US and China finally kicked off their long-awaited latest round of trade talks on Thursday and analysts watched on nervously for any signs of white smoke.
Discussions took place after markets in Europe had closed and most countries saw gentle rises as hopes of a decent outcome spread like a virus.
As a result, the FTSE 100 closed the day up slightly, rising 19.86 points – or 0.28% – to 7,186.36, although it traded down throughout the morning.
The fact that sterling remains above 1.20 dollars suggests that pound investors are still optimistic that the UK will avoid a no deal Brexit. At these levels pound investors are pricing in an extension, rather than a Brexit deal or no deal Brexit. Fiona Cincotta, City Index
In Europe, the French CAC closed up 1.27% and the German DAX rose 0.58%.
Senior market analyst, Fiona Cincotta at City Index, said: “Equities lacked direction in the European session, as investors sat on the sidelines waiting for developments regarding the US–Sino trade talks. With the 13th round of talks… it’s anyone’s guess as to whether the two powers will be able to hammer out a deal.”
The FTSE could have risen higher but was stunted by a strong pound rising 1.45% against the dollar at 1.2384, with traders feeling more confident that a Brexit extension or a deal is on the way. The pound was also boosted by decent GDP figures suggesting the UK will avoid a recession.
Ms Cincotta explained: “There is a real sense that this is last chance saloon. Investors are watching closely to see if a deal can be pulled from these final talks. The fact that sterling remains above 1.20 dollars suggests that pound investors are still optimistic that the UK will avoid a no deal Brexit. At these levels pound investors are pricing in an extension, rather than a Brexit deal or no deal Brexit.”
Against the euro the pound was up 10.2% at 1.1239.
A barrel of Brent Crude also saw a jump in price, with a barrel up 0.9% to 58.82 dollars, as Turkey’s military invasion of Syria unnerved investors over the impact on global supply.
In company news, fashion retailer N Brown revealed a return to profit in its first half as an online push starts to pay off.
The group behind brands Simply Be, Jacamo and JD Williams saw shares leap 7% higher, up 7p to 107p, as it posted pre-tax profits of £18.8 million for the six months to August 31, against losses of £27.1 million a year ago. Revenues dropped 5.4% to £432.9 million.
Hargreaves Lansdown said it was hit by “weak investor sentiment” in the past three months due to fears surrounding Brexit and the global economy.
It told investors that the uncertainty had impacted new business, however it hailed a “solid start” to the financial year in the current climate, with new business up from £1.3 billion to £1.7 billion in the three months to September 30. Shares closed down 49.5p at 1,767p.
Retailer Dunelm warned that trading in September was “mixed” due to a “softer homeware market”, as it posted a 7.5% rise in total sales to £262.6 million for the three months to September 28. Like-for-like sales increased by 6.4% to £255.6 million over the period.
But investors took flight, sending shares down 84.5p to 730.5p.
The biggest risers on the FTSE 100 were Antofagasta, up 37p at 864p, Anglo American, up 73.6p at 1,923.6p, Lloyds, up 1.97p at 52.67p, BT Group, up 6.88 at 184.86, and Kingfisher, up 6.9p at 192.8p.
The biggest fallers on the index were Barratt Developments, down 22.6p at 586.8p, Hargreaves Lansdown, down 49.5p at 1,767p, Fresnillo, down 15.2p at 654.2p, Just Eat, down 13.6p at 617.8p, and Centrica, down 1.38p at 66.62p.