London close: Stocks finish higher as investors watch for Brexit news

London stocks managed to close in positive territory on Tuesday after the selloff in the the previous session, while sterling lost ground following reports of another setback in Brexit talks.

The FTSE 100 ended the session up 0.57% at 6,453.16, and the FTSE 250 was 1.31% firmer at 19,950.72.

Sterling remained on the back foot, last falling 0.95% against the dollar to trade at $1.3336, and sliding 0.43% on the euro to €1.0949.

“Equity benchmarks are set to finish higher on the day as traders have swooped in and snapped up relatively cheap stocks as the mood is a little more optimistic,” said CMC Markets analyst David Madden.

“The new strain of Covid-19 that is in circulation in the UK is still a major concern but some of the fears have melted away today.

“The French government has signalled that they are looking to end the ban on UK freight entering the country and that has assisted sentiment.”

Madden said that Monday’s headlines about the UK potentially being isolated had dropped off the radar, which propped up British stocks on Tuesday.

“Broadly speaking, today’s upward move is a reversal of yesterday’s very negative session as banks, airlines, transport stocks and housebuilders are enjoying decent gains.

“IAG, the parent of BA and Aer Lingus, NatWest, Lloyds and Barclays are some of the biggest gainers on the FTSE 100.

“The dialling down of the health crisis has pushed Ocado into the red.”

On Monday, the UK made a proposal that would see the EU reduce the value of the fish it catches in UK waters by 30%, down from the 60% cut it was insisting the EU accept last week.

However, sources cited by Bloomberg said the offer had been rejected.

The UK and the EU have until 31 December to agree a trade deal.

On Monday, the British government insisted it would not extend the transition period despite growing calls for the deadline to be pushed back.

“There will be a compromise, there has to be,” said Neil Wilson, chief market analyst at Markets.com.

“It's always going to seem further away until the last leap of faith.

“It will all happen very quickly when it happens.”

There were a few bright spots in the form of US approval of a $900bn Covid relief bill, and an upward revision to third-quarter UK GDP.

Figures released earlier by the Office for National Statistics showed that gross domestic product grew by a record 16% in the third quarter, while government borrowing surged last month.

This was up from an initial estimate of 15.5% and meant the economy was still 8.6% below where it was at the end of last year, up from an initial estimate of 9.7% below.

Separate data from the ONS showed that government borrowing rose to £31.6bn in November, compared to consensus expectations of £31.4bn.

That was a £26bn increase on November 2019, which is both the highest November borrowing and the third-highest borrowing in any month since monthly records began in 1993.

Ruth Gregory, senior UK economist at Capital Economics, said borrowing would probably remain high over the next few months as Covid-19 restrictions stayed in place.

"Of course, third quarter and November are old news," she said.

"And the possibility that the new Tier 4 Covid-19 restrictions are extended and broadened in the coming months means that the risks to our first quarter GDP forecast - +1.0% quarter-on-quarter - are weighted heavily to the downside.”

In equity markets, banks were among the top gainers after heavy losses on Monday, with Lloyds up 3.32%, Barclays adding 3.34%, and NatWest 3.55% higher.

British Airways and Iberia owner IAG gained 5.8%, engine maker Rolls-Royce added 2.18% and GKN owner Melrose Industries was ahead 2.28%, after all three suffered sharp falls in the previous session.

On the downside, online supermarket Ocado, which rallied on Monday as investors mulled the impact of Tier 4 lockdowns, reversed those gains to lose 2.87%.

Market Movers

FTSE 100 (UKX) 6,453.16 0.57%
FTSE 250 (MCX) 19,950.72 1.31%
techMARK (TASX) 4,048.28 2.15%

FTSE 100 - Risers

International Consolidated Airlines Group SA (CDI) (IAG) 152.25p 5.80%
NATWEST GROUP PLC ORD 100P (NWG) 158.90p 3.55%
Barclays (BARC) 145.98p 3.34%
Lloyds Banking Group (LLOY) 34.69p 3.32%
Avast (AVST) 531.50p 3.30%
JD Sports Fashion (JD.) 813.60p 3.20%
Smith & Nephew (SN.) 1,556.50p 2.47%
Legal & General Group (LGEN) 249.20p 2.42%
Schroders (SDR) 3,358.00p 2.35%
Melrose Industries (MRO) 168.50p 2.28%

FTSE 100 - Fallers

Ocado Group (OCDO) 2,265.00p -2.87%
Fresnillo (FRES) 1,140.50p -2.14%
AstraZeneca (AZN) 7,328.00p -1.51%
Pershing Square Holdings Ltd NPV (PSH) 2,385.00p -1.45%
Kingfisher (KGF) 266.10p -1.34%
Glencore (GLEN) 232.65p -1.29%
Sainsbury (J) (SBRY) 217.80p -1.13%
Polymetal International (POLY) 1,676.00p -1.03%
Morrison (Wm) Supermarkets (MRW) 171.00p -0.87%
Anglo American (AAL) 2,412.50p -0.76%

FTSE 250 - Risers

Signature Aviation (SIG) 397.10p 6.43%
Capita (CPI) 38.90p 6.31%
Apax Global Alpha Limited (APAX) 188.00p 5.98%
Polypipe Group (PLP) 575.00p 5.50%
Contour Global (GLO) 206.50p 5.14%
Edinburgh Worldwide Inv Trust (EWI) 367.50p 5.00%
Vivo Energy (VVO) 83.80p 5.00%
Provident Financial (PFG) 281.20p 4.52%
FirstGroup (FGP) 70.00p 4.40%
Just Group (JUST) 65.30p 4.35%

FTSE 250 - Fallers

Network International Holdings (NETW) 270.00p -6.90%
Indivior (INDV) 94.85p -3.22%
Petrofac Ltd. (PFC) 138.00p -2.61%
Centamin (DI) (CEY) 121.45p -2.45%
Biffa (BIFF) 222.50p -2.41%
Ibstock (IBST) 205.40p -2.35%
Domino's Pizza Group (DOM) 315.20p -2.05%
Premier Foods (PFD) 95.60p -1.95%
UK Commercial Property Reit Limited (UKCM) 63.90p -1.70%
LXI Reit (LXI) 114.80p -1.56%