FTSE extends relief rally, pound falls on Brexit gulf

(Update) Stock markets continued to advance with the FTSE 100 gaining 1% ahead of details of a €500bn (£449bn) European stimulus package, but the pound sank as the UK’s Brexit talks with the EU ran into difficulties.

On Wall Street the S&P 500 opened 0.8% up at 3,015 as investors anticipated a post-pandemic economic recovery, although caution remained about US-China tensions over Hong Kong where thousands of demonstrators protested against a proposed security law.

In Europe, Spain’s Ibex index soared 2.3%, France’s CAC 40 advanced 1.8% and Germany’s DAX 30 added 1.3% as markets waited for the European Commission to put its bailout package before parliament.

On currency markets, the pound slid 0.7% to $1.224 against the dollar as traders continued to fret about the possibility of the Bank of England imposing negative interest rates in response to the coronavirus slump.

Brexit fears resurfaced to knock sterling after David Frost, the UK’s chief negotiator  with the European Union, repeated his view that the two sides were a long way from reaching an agreement by the end of the year.

The pound’s weakness helped the FTSE 100 extend its gains for a second day.

The blue-chip index gained 59 points to 6,127 despite Asian shares slipping overnight as US President Donald Trump weighed into the growing constitutional dispute between China and Hong Kong. 

Trump promised a ‘very interesting’ response to China’s plan to crack down on liberties in Hong Kong, stating that the area could lose its status as a key financial centre. China has responded by threatening countermeasures against the US.

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‘The overriding concern here is that the cooling relations between the two largest economies could hamper the post-coronavirus economic recovery,’ said Fiona Cincotta of broker City Index. 

Spreadex analyst Connor Campbell said markets are continuing to ignore the ‘red flags’ around the US and China and despite Trump’s vow to take action against the superpower if it imposes national security laws in Hong Kong, investors are ‘insistent on focusing on the lockdown-easing measure from around the globe’.

Financials did most of the lifting with fund manager M&G (MNG) rallying 9% or 11.5p to 139p after unveiling a deal to buy Royal London’s Ascentric funds platform alongside a positive trading update.

Wealth management salesforce St James’s Place (STJ) rose 8% or 70p to 947p after reporting strong inflows of money into its funds last month.

London Stock Exchange (LSE) was a prominent faller though, down 5% or 410p at £78.62.00.

British Land (BLND) advanced 7% or 27p to 406.7p after the real estate investment trust reported annual losses soaring to £1.1bn due to a 26% drop in the value of its retail properties, but offset this with news that its offices portfolio had held up better than expected.

Rival shopping centre owner Hammerson (HMSO) slid 4.8% or 3.6p to 70.8p after its chief executive David Atkins said he would step down next spring after 10 years at the helm.

Optimism was also evident on the ‘mid-cap’ FTSE 250 index, which put on 125 points or 0.7% to 17.058.

Travel operator Tui (TUI) was an early leader, surging 18% or 82p to 541p for its second day of big gains after Spain’s decision to reopen to tourists.  

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