• FTSE 100 index closes up 40 points
  • UK and EU set out stalls ahead of trade negotiations 
  • Coronavirus still looms

5pm: FTSE 100 closes higher

FTSE 100 index closed ahead on Monday, boosted mainly by the weaker pound as no-deal fears re-emerged after Prime Minister Johnson set out his vision of the UK’s future relationship with the EU ahead of negotiations.

The UK left the EU on Friday night and a transition period has now begun.

In addition, as the coronavirus death toll mounts, markets hailed the US$175 billion injection of liquidity by the Chinese central bank.

FTSE 100 closed Monday ahead by around 40 points, or 0.55% at 7,326.  Midcap cousin FTSE 250  gained over 63 at 21,207.

Sterling dropped 1.43% against the US dollar to US$1.3015.

It came as “….Boris Johnson and Michel Barnier laid out their conflicting positions on the future of the UK-EU trade relationship ahead of the start of talks in March,” noted Connor Campbell at Spreadex.

“The PM doesn’t want to have to stick to EU rules and regulations; the bloc’s chief negotiator claims Johnson has already agreed to do exactly that.”

On Wall Street, the Dow Jones Industrial Average added over 255 points at 28,511, while the S&P 500 gained over 30 points at 3,256.

3pm: FTSE 100 gets a boost as Wall Street opens modestly higher

London’s blue chips got a boost as Wall Street opened a little higher following Friday’s meltdown.

The FTSE 100 index gained 65 points to 7,350 as sterling nosedived 1.3% to US$1.3033.

Meanwhile, the Dow was up 0.5% to 28,397 while the S&P 500 rose 0.7% to 3,245.

Oanda’s Edward Moya said the cash injection by the People’s Bank of China (PBOC) has helped US and European stocks to rebound, but it will take more weeks before markets stay confident on the virus being contained in China.

“This is just the beginning of help from the PBOC, but if we continue to see the virus have over 20% daily increases in both the death toll and number of cases, this will just become another dead-cat-bounce,” he said.

Back in the UK, some of the biggest risers were on the back of broker changes led by Diageo PLC (LON:DGE), surging 3% to 3,100.25p.

Broker Kepler Cheuvreux topped up its recommendation to ‘buy’ from ‘hold’ and tweaked up its target price to 3,700p from 3,400p as the drinks giant offers attractive exposure to US spirits growth, low exposure to Asia and a bumper share buyback.

In the utilities sector, Barclays upgraded SSE PLC (LON:SSE) to ‘overweight’ from ‘equal weight’ as the sector is set to invest trillions in renewables to reach net-zero targets.

Analysts also upped National Grid plc’s (LON:NG. target price to 1,115p from 1,010p as the government is expected to ramp up budgets.

FTSE 250-listed Drax PLC (LON:DRAX) also got an upgrade to ‘overweight’ from ‘equal weight’ on the back of boosts in carbon capture and storage (CCS) technology.

1.30pm: FTSE 100 helped higher as sterling slips on BoJo speech

The Footsie regained ground in early afternoon trading as sterling dropped further after Boris Johnson’s speech showed little common ground with what chief Brexit negotiator Michel Barnier said just a few hours earlier.

“The EU and UK look in very different places right now at the start of talks,” said Neil Wilson from Markets.com.

Barnier said the Union’s offer is conditional on open, fair competition with the application of its rules, while disputes will have to be decided by the European court.

But Johnson said no to both and added there is no need for a binding agreement.

He also wants to include Gibraltar in the negotiations, while Brussels previously stated the enclave will have to carry out its own deal.

Moreover, Downing Street is ready to consider a fishing deal by proposing annual negotiations with the continent, which seems unlikely to wash with the EU, analysts say.

“We are left at present at something of an impasse before the talks even begin,” Wilson added.

“What we should remember is that, as in all negotiations, these views are the starting point, not the final destination.”

The big caps shot up 37 points to 7,322 pushed by a 1.2% fall to US$1.3051 of the pound.

11.50am: US expected to open higher despite coronavirus fears

London’s big caps trimmed its gains in late morning as markets remain on edge over the coronavirus crisis worsening.

The Footsie index was up 26 points to 7,312 while the pound continued its 1% descent to US$1.3067.

“The relatively small rebound in European markets suggests there is not a huge amount of bullish sentiment circulating,” said David Madden from CMC Markets.

Earlier, the People’s Bank of China lowered interest rates to boost the economy and provided 1.2 trillion yuan (£130bn) to the banking system as short-term liquidity.

“More may need to be done to ward off the market ghouls,” said Emma Wall from Hargreaves Lansdown.

“It is safe to assume that a country whose inhabitants can’t travel – or in some cases even leave their homes – will see slump in economic growth.”

It will hit companies with close ties to the Chinese economy such as luxury firm Burberry Group PLC (LON:BRBY), analysts say.

Travelling to the US, Wall Street is expected to open higher.

11am: UK will not align to EU rules

The FTSE 100 gained another few points in mid-morning as traders focus on the challenges ahead while Boris Johnson prepares to give a speech later.

London’s big caps extended their gains by 33 points to 7,319 helped by sterling falling further, down 1% to US$1.3075.

Connor Campbell from Spreadex the pound is having “a wobble” reflecting an arduous year of trade negotiations ahead.

The Prime Minister is expected to say that the UK will not align to European rules on competition policy, subsidies, social protection and the environment.

He will also say Britain rejects the jurisdiction of European courts.

Campbell said sterling’s fears are not “unfounded” and said Downing Street’s tactic “is going to give sterling palpitations over the coming months”.

Meanwhile, Brussels has published draft negotiating guidelines for trade talks with UK.

Chief Brexit negotiator Michel Barnier said at a press conference the EU will be “very demanding” in setting level playing field conditions.

“Given the Union and the United Kingdom’s geographic proximity and economic interdependence, the future relationship must ensure open and fair competition, encompassing robust commitments to ensure a level playing field,” he added.

9.45am: UK manufacturing PMI at nine-month high

The FTSE 100 kept the momentum up in mid-morning as fresh data on Britain’s manufacturing sector suggested employment and business confidence is on the rise.

The purchasing managers’ index (PMI) rose to a nine-month high of 50.0 in January from December’s reading of 47.5.

IHS Markit said the start of the new year saw a “steady” performance as the general election improved political uncertainty: households and businesses have increased their spending but Brexit looms over a full recovery.

Overseas demand remained a weak point as new export orders fell for the third month in a row due to weak economic growth in key markets, mostly Europe.

“With a small uplift in employment levels and optimism at an eight-month high, this is certainly better news than we’ve had in a while,” said Duncan Brock, group director at the Chartered Institute of Procurement & Supply.

“Hopefully the momentum will now build in spite of potential obstacles and the sector pulls itself up by its bootstraps into growth next month as the UK negotiates its position with the EU.”

London’s blue chips advanced 20 points to 7,306 while sterling was trading 0.7% lower at US$1.3104.

8.25am: Positive start to the week

Traders ignored the rather choppy start to the week in Asia and marked UK stocks higher in early London trading on Monday.

The index of UK blue-chips opened 19 points to the good at 7,305.17

After the hiatus for the Lunar New Year, Chinese stocks began the Year of the Rat with an 8% tumble, effectively playing catch-up with the rest of the world, which has already priced in the threat of the coronavirus pandemic.

“The situation in China looks pretty dire and globally we now have more 17,000 cases [of coronavirus] confirmed and 362 deaths,” said Neil Wilson, senior analyst at Markets.com.

“Apple will close all stores and offices in China. This has the hallmarks of a black swan event in the making – we simply don’t know yet what the impact will be. China is a far larger portion of global GDP than it was in 2003 (about 18%).

“Cool heads play it down, and we should remain level-headed here, but this is how crises can start.”

Returning to the UK, analysts at Barclays were busy on Monday, upgrading power generator Drax (LON:DRAX) and energy distributor SSE (LON:SSE) to ‘overweight’ from ‘neutral’. The former rose 2.3%, while the latter was up 1.3%.

The publisher Future (LON:FUTR) gained some of the ground lost on Friday following its pummelling after the release of a scathing 69-page report published by the short-seller Shadowfall (great title for a Bond film). The stock was up 10% on Monday after a bullish trading update.

Proactive news headlines:

Oracle Power PLC (LON:ORCP) has entered into a shareholder lock-in agreement with His Highness Sheikh Ahmed Bin Dalmook Al Maktoum and Sheikh Ahmed Bin Dalmook Al Maktoum Private Office One Person Company LLC. The Lock-in is being entered into voluntarily by His Highness and is effective for a term of 12 months. During this period His Highness has agreed not to sell, transfer or otherwise dispose of the rights to any of the 200mln Oracle shares that he owns.

ADM Energy Plc (LON:ADME) shares surged on Monday morning after it struck a deal with commodities trader Trafigura to find potential deals in the African energy sector. If the planned “strategic alliance” is formed, AIM-listed ADM will be in charge of “originating, analysing, developing, structuring and negotiating” potential projects with other parties and then will present them to Trafigura for “further evaluation”.

Corero Network Security PLC (LON:CNS), the network security company, has announced two new customer wins for its SmartWall DDoS (distributed denial of service) protection product, plus an additional purchase from an existing customer, totalling US$1.0mln over the course of the contracts. Ashley Stephenson, Corero’s CEO commented: “We have made a strong start to 2020 with these new and existing customer wins demonstrating the increasing traction for our SmartWall products.”

Scancell Holdings PLC (LON:SCLP) said it will ramp up patient recruitment after receiving the green light to start a phase II clinical trial of its cancer treatment in the US. This followed the granting of investigational new drug status for SCIB1 by the Food & Drug Administration (FDA) for use in people with late-stage melanoma.

Eco (Atlantic) Oil & Gas Limited (LON:ECO)  has reported a 29% increase in the estimate for the amount of oil contained at its Orinduik Block, offshore Guyana. Gross prospective resources are now estimated at 5.14mln barrels on a p50 basis or best basis, which amounts to a net 771mln barrels to Eco for its 15% stake.

IronRidge Resources Ltd (LON:IRR) has returned more high-grade gold as well as broad intersections in the latest batch of assay results from exploration at the Zaranou gold project in Côte d’Ivoire. The results form the final batch of assays from the company’s maiden exploration drill programme which totalled 7,448 metres of aircore drilling in 151 holes and 1,593 metres of reverse circulation drilling in 10 holes. Among the highlights were six metres at 6.44 grams per tonne gold, and two metres at 7.11 grams per tonne gold.

Yellow Cake PLC (LON:YCA) has revealed results for the quarter to 31 December 2019. The company’s estimated net asset value rang in at 211p per share, a significant premium on the current share price of 187p. Total assets amounted to US$245.3mln, comprising largely of 9.62mln pounds of physical uranium (U3O8) valued at a spot price of US$25.00 per pound.

Integumen PLC (LON:SKIN) has formed an alliance with a specialist supplier to municipal and utility customers in order to broaden distribution for its RAWTest water testing product. The AIM-listed company’s Rinocloud subsidiary agreed a commercial development partnership with South Africa’s Acumen Software to create a combined offering of Acumen’s integrated mobile asset and management software platform with RinoDrive’s data analytics, data refining capabilities and RAWTest AI real-time water monitoring service.

Verona Pharma PLC (LON:VRP, NASDAQ:VRNA) said David Zaccardelli has replaced Jan-Anders Karlsson as chief executive, while Mark Hahn has been drafted in as chief financial officer. The respiratory drugs specialist said Karlsson was retiring after eight years with the company and will pursue non-executive roles, while former CFO, Piers Morgan will remain in place until the end of the month “to provide an efficient transition and complete required financial reporting”. The two new senior hires have come from Dova Pharmaceuticals, which was last year sold to Swedish Orphan Biovitrum AB in a US$915mln deal.

Polarean Imaging PLC (LON:POLX) announced that Dr Jonathan Allis has assumed the role of non-executive chairman of the clinical stage medical imaging technology company with immediate effect. In a statement, the AIM-listed firm – which is developing a proprietary magnetic resonance imaging (MRI) drug-device combination – noted that Dr Allis has a wealth of direct knowledge in healthcare and the medical imaging contrast agent industry and is currently the founder and chief executive officer of Blue Earth Diagnostics, which was recently acquired by Bracco Imaging for US$450mln.

Angling Direct PLC (LON:ANG), the UK’s largest and fastest-growing fishing tackle and equipment retailer, has appointed Dilys Maltby, who has extensive experience working with consumer brands both as a consultant and as a client, as a non-executive director of the company with immediate effect. In a statement, the AIM-listed firm said Maltby, who has a strong track record in advising international consumer brands on their purpose, brand strategy and proposition, will be working with its board “to review, identify and deliver on its purpose”.

Gulf Keystone Ltd. (LON:GKP) has confirmed that a gross payment of US$20.1mln (US$15.8mln net) has been received from the Kurdistan Regional Government for Shaikan project crude oil sales during September 2019.

Resolute Mining Ltd (ASX:RSG) (LON:RSG) has strengthened its balance sheet by repaying a US$130 million acquisition bridge facility that funded the cash component of Resolute’s acquisition of Toro Gold Limited in July 2019. Repayment of the facility was funded from proceeds of the company’s recent equity raising in combination with available cash on hand.

Base Resources Limited (LON:BSE) (ASX:BSE), the African mineral sands producer has advised shareholders that the latest company presentation, which was given at the Arlington Pre-Daba conference and will be presented at the 121 Mining Investment conference – both in Cape Town, South Africa – is available from the company’s website.

Danakali Limited (ASX:DNK) (LON:DNK) said shareholders can view the group’s Investing in African Mining Indaba conference presentation on the company’s website.

6.30am: Footsie called higher 

The FTSE 100 is expected to stand firm in the face of the sharp falls seen overnight in China, where markets reopened after the Lunar New Year.

Coronavirus fears knocked the Shanghai Composite 8% lower; however, the price action elsewhere in Asia was more muted.

Hong Kong’s Hang Seng reversed its early losses to trade sideways, while the markets of Japan and Korea were each down around 1%.

After Britain finally exited the EU at 11pm on Friday, Boris Johnson and his European counterparts now have 11 months to figure out what their future relationship will look like.

Johnson will use a speech in London to assert that the UK will not be rule takers from Brussels ahead of negotiations over a Canada-style trade deal.

In his speech, the PM will say: “We have often been told that we must choose between full access to the EU market, along with accepting its rules and courts on the Norway model, or an ambitious free trade agreement, which opens up markets and avoids the full panoply of EU regulation, on the example of Canada.

“We have made our choice – we want a free trade agreement, similar to Canada’s but in the very unlikely event that we do not succeed, then our trade will have to be based on our existing Withdrawal Agreement with the EU.”

Looking ahead, we have scheduled news this week from GlaxoSmithKline (LON:GSK), BP (LON:BP.) and Royal Mail (LON:RMG) but not too much to excite on Monday.

Around the markets:

  • Pound US$1.3162, down 0.33%
  • Gold down US$3.40 at US$1,584.50 an ounce
  • Brent crude off 34 cents a barrel at US$56.28

Significant events expected on Monday:

Finals: Porvair PLC (LON:PRV)

Trading announcements: Ryanair Holdings plc (LON:RYA)

Economic data: UK manufacturing PMI, US manufacturing PMI

City headlines:

  • Financial Times
  • Nissan drafts plan to double down on UK under hard Brexit
  • UK and EU begin sparring with bruising talks ahead
  • Credit Suisse freezes investment bank bonus pool
  • Times
  • China pumps in £130bn to calm markets
  • South Western Railway faces losing franchise if new bid falls short
  • HS2 landed with £500m VAT demand
  • Telegraph
  • Credit Suisse espionage scandal deepens as report suggests bank spied on Greenpeace
  • Guardian
  • UK productivity slowdown worst since Industrial Revolution – study
  • Car industry could see price war on hybrid vehicles in 2020
  • Ofgem sets out nine-point plan to prioritise climate crisis