Pound’s rise knocks FTSE as Dominic Cummings set to quit

The FTSE 100 has slipped for the second day in a row, knocked by the pound’s rise on news prime minister Boris Johnson’s top adviser Dominic Cummings is set to leave Downing Street. 

Sterling rose 0.5% to $1.318 against the dollar as investors anticipated the departure of Cummings, who is reportedly expected to leave by the end of the year, could lead to a less hard line approach from the UK government to Brexit talks.

That knocked the FTSE 100, whose stocks rely on overseas markets for around three-quarters of their earnings, sending the index three points lower to 6,336, as a stellar week for the UK stock market draws to a close.

Analysts cautioning markets were ‘at a crossroads’ after a substantial rally following Pfizer’s announcement of a coronavirus vaccine breakthrough earlier in the week.

Fighting back from a bigger fall in early trading as retail and leisure stocks gave up some gains, the blue-chip index was down 7 points, or 0.1%, at 6,332.

‘More than a week after the [US] election, and a few days out from the Pfizer vaccine headlines, the market’s most recent rally appears to have come to an end,’ said Spreadex analyst Connor Campbell.

‘While the markets have been given the two most positive news items of 2020 in the space of a week, they still fall under the dark cloud of Covid-19. Which means, once the dust has settled on things like the election and the vaccine update, investors are left grappling with surging daily cases, rising deaths, and a continued assault on the global economy.’

The FTSE 100 is up more than 7% this week, but remains 16% down year to date.

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Neil Wilson, chief analyst at Markets.com, said markets were ‘at a crossroads’, with investors trying to figure out to do after the ‘exuberant vaccine-induced’ rally. He also pointed to the soft session on Wall Street yesterday, where the S&P 500 recorded a 1% decline, with California since becoming the second state after Texas to top 1m Covid-19 cases.

‘Whilst there is great hope for next year because of the vaccine, we are far from out of the worst of the pandemic – US cases are surging at record levels and lockdown measures persist in Europe. Airlines and travel fell sharply as profits were taken after some very large moves this week,’ said Wilson.

‘The question for investors is whether they think there are enough incremental buyers on the side lines to drive markets higher.’

Medical devices group Smith & Nephew (SN) fell 2.3% to £14.92, extending losses the week.

Both paring back big gains this week, Next (NXT) was down 2.1% to £66.86 and Primark-owner Associated British Foods (ABF) declined 1.8% to £19.98.

Rolls-Royce (RR) rose higher again, its shares up 5.7% to 95.1p. Some banks also made gains, with NatWest Group (NWG) up 3.9% to 149p and Lloyds (LLOY) rising 3.7% to 34.7p

But as investors headed for perceived safety, technology was the only sector in positive territory. Just Eat Takeaway.com (JET) gained 1.8% to £85.56.

The ‘mid-cap’ FTSE 250 index rose 29 points, or 0.2%, to 19,331.

Leading the risers, outsourcer Capita (CPI) gained 7.3% to 38.8p, while spread betting company CMC Markets (CMCX) was up 4.9% to 355p.

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After jumping yesterday, defence company QinetiQ Group (QQ) fell back 3.2% to 313p. Cairn Energy (CNE), an oil and gas company, dropped 2.4% to 144p. WH Smith (SMWH) shed 2.2% to £13.71.

Among real estate investment trusts, office space provider Workspace Group (WKP) fell 2.1% to 701p while GCP Student Living (DIGS) was down 1.8% to 142p.

Baillie Gifford China Growth (BGCG) dropped 3.4% to 483p, signalling investors remain concerned about the high 17% premium to net asset value at which its shares closed yesterday.

(7:00) Asian stocks fall

SINGAPORE: Asian stocks turned lower Friday as investors heeded the pullback on Wall Street, reports Citywire Asia.

Japan’s Nikkei 225 fell 1% and South Korea’s Kospi was 0.2% lower. The Shanghai Composite lost 1.3% in early trading. 

Australia’s S&P ASX 200 gave up 0.5%. The Taiwan Capitalization Weighted Stock Index eased 0.2% and the Straits Times index in Singapore was down 0.9%.

The FTSE Bursa Malaysia KLCI dropped 0.8%, ahead of third quarter economic data. The figure is expected to be markedly better than the second quarter’s 17.1% contraction.

But it will be a ‘far cry from a broad-based, resounding rebound,’ said Vishnu Varathan, head of economics and strategy at Mizuho Bank, that projects a 9.2% contraction. 

Hong Kong’s Hang Seng Index fell 0.8%. Tencent (0700.HK) jumped 2.5% after its quarterly earnings beat consensus. 

Nomura is keeping its ‘buy’ rating on the stock, although it lowered its target price from HKD 703 ($90.66) to HKD 690 ($88.98) on Friday. 

Over on Wall Street, indices pared back gains from positive vaccine developments. The Nasdaq fell 0.7% and S&P 500 index lost 1%.

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The Dow dropped 1.1% even after initial jobless claims fell by the most in five weeks. The indices are still up 0.8-2.4% this week.

‘To be sure, this is a check on the extent and timing of “out of the woods” trades rather than a repudiation of vaccine breakthroughs.

‘It is all about timing. But for now, new cases and hospitalisations in US hitting records of more than 144,000 and 65,000 respectively is cause for caution, if not consternation,’ Varathan said. 

The recovery will be helped by Joe Biden’s imminent presidency, Federated Hermes’ Gier Lode believes. 

‘A likely split congress, widely touted as positive for equity markets, will mean that the favourable US business environment is set to continue.

‘Over both Monday and Tuesday investors digested the news sending the unloved value stocks “cruising” or “flying high”.

‘It seems the gradual economic recovery is set to continue with the road to normalisation firmly on track, supported by a strong quarter of earnings surprises,’ Lode said. 



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