European Market Open: European indices to surge higher as focus remains on Brexit talks

UK prime minister Boris Johnson is set to meet European Commission president Ursala von der Leyen in Brussels later today, with dinner pencilled in tonight, as the pair try and break the Brexit deadlock.

Brexit 5

What to watch this morning

Brexit: Johnson heads to Brussels in hope of a deal

UK prime minister Boris Johnson is set to meet European Commission president Ursala von der Leyen in Brussels later today, with dinner pencilled in tonight, as the pair try and break the Brexit deadlock.

The EU’s chief negotiator Michel Barnier has indicated Wednesday is the last chance for an agreement to be reached in order to give both sides time to vote and ratify the deal. The last European Council meeting starts on Thursday and, while Brexit is not formally on the agenda, it is the last time EU leaders are scheduled to meet before the December 31 deadline.

The UK has scrapped certain clauses that aimed to give it the right to breach parts of the Withdrawal Agreement signed last year that outlined how trade and the flow of goods between Britain and Northern Ireland would be governed. While this does nothing to solve the impasse on the three major sticking points – fisheries, governance and the level playing field – the UK is hoping it can act as a peace offering to improve the mood during this final push for a deal.

UK to sweeten US in hope of trade deal

The UK government has set out its ‘independent approach’ to long-standing disputes between the EU and the US over matters concerning steel, aluminium and tariffs on planes as it hopes to strike a trade deal with incoming US president Joe Biden.

International trade secretary Liz Truss announced the UK was set to rollover tariffs on US aluminium and steel and suspend ‘retaliatory tariffs’ imposed by the EU on US plane maker Boeing as part of a dispute about aerospace parts.

The move is significant, as it means the UK is breaking ranks with the EU in the hopes it can lead to a new trade deal with the US.

FTSE 100 set to hit highest level since March

The FTSE 100 is set to open 0.5% higher this morning at 6591.5, having closed at 6561.9 yesterday, pushing it to levels not seen since early March.

Concerns over a Brexit deal are being overshadowed by the weakness in the pound and the roll-out of a vaccine, raising hopes that stocks that have been hard-hit this year can bounce back.

AstraZeneca and Oxford university vaccine may need more testing

The COVID-19 vaccine being developed by AstraZeneca and Oxford university has been peer-reviewed by the Lancet medical journal. Confusion was caused by the Phase 3 results that showed the candidate was 70% effective among over 11,000 people in the trial but up to 90% effective in 1,300 people who had accidentally been given a lower initial dosage. The review supported the figures, suggesting halving the first initial dose could be more effective than a full dose, but also said this will require further research – possibly delaying its approval.

Meanwhile, US regulators said the vaccine developed by Pfizer and BioNTech begins to work just 10 days after the first dose. The vaccine, which has already been approved in the UK, could be approved for emergency use in the US as soon as this week.

British American Tobacco ‘performs strongly’ during pandemic

BAT said it has performed strongly this year and believes it will meet its targets for the full-year. It is expecting to report a 2.5% decline in annual revenue compared to a 3% fall previously, but said adjusted diluted earnings per share should grow.

Royal Dutch Shell executives quit over clean energy transition

The FT reported late yesterday that several clean energy executives have quit over differences about how the oil and gas giant should transition to cleaner energy. The timing is significant as the company is due to outline its strategy on how the company intends to respond to the shift in energy markets in the coming weeks.

Allied Universal strikes £3.8 billion deal to buy G4S

G4S announced late last night that it has agreed to be taken over by Allied Universal for 245 pence per share, valuing the security services provider at £3.8 billion. The pair said the combination would create a ‘world-leading integrated security business’ with $18 billion in annual revenue. Allied Universal failed to convince the G4S board with an initial bid of 210p last month, while rival GardaWorld has also had several bids rebuffed by G4S. 

Balfour Beatty expects to meet full-year expectations

Balfour Beatty said it expects revenue to be broadly flat for the year and that profits should be in line with expectations. The infrastructure firm said its order book is expected to finish the year at £17 billion compared to just £14.3 billion a year ago, mainly thanks to work relating to HS2. It also said it was seeking a replacement for chairman Philip Aiken, who is leaving in May 2021.

European indices to open markedly higher

The Euro STOXX Index is called to open 0.4% higher at 3543.5 this morning after ending Tuesday at 3530.9.

Germany’s DAX is set to set to open 0.3% higher at 13331.5, having ended yesterday at 13287.0. Meanwhile, France’s CAC 40 is to open 0.4% higher at 5588.0 from 5565.3 on Tuesday. That puts both indices at levels not seen since February.

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Volkswagen to offer fixed prices in China

German carmaker Volkswagen is to explore a new sales model in the world’s fastest-growing electric car market. The German carmaker intends to allow Chinese buyers to purchase cars at fixed prices through its website, using third-party dealerships to fulfil demand. Usually, carmakers set a price but dealerships have the flexibility to tweak prices depending on stock levels.

Aurubis posts rise in profits and posts bullish outlook

Aurubis, Europe’s largest copper producer, said operating earnings before tax grew 15% in the its recently-ended financial year to EUR221 million. The miner said it expects earnings to rise further to a range of EUR210 million to EUR270 million in the 2021 financial year, up from its previous target of EUR185 million to EUR250 million. It also raised its final payout to EUR1.30 per share from EUR1.25 the year before.

Clariant appoints Conrad Keijzer as CEO

Clairant says Conrad Keijzer will become the specialty chemicals maker’s new chief executive at the start of 2021, allowing interim CEO Hariolf Kottmann to return to his role as chairman. Keijzer was most recently the boss at French firm Imerys and has previously led AkzoNobel’s performance coatings division.

Forex: Cable strengthens

The pound remains centre stage again this morning as the currency remains volatile as the clock ticks down for a Brexit breakthrough to be announced. The steep falls in sterling this week suggests markets have not fully priced-in the possibility of a no-deal Brexit at the end of this year, but the pound has recovered some losses this morning.

GBP/USD trades at 1.33855 this morning, up 0.2% from 1.33563 at the UK markets close on Tuesday. Meanwhile, EUR/GBP trades at 0.90698, a smidgen higher from 0.90674 yesterday.

GBP/CAD was up 0.1% at 1.71290 from 1.71079 at yesterday’s close, while GBP/AUD was down 0.2% from 1.80101.

Meanwhile, EUR/USD is at 1.21386 in morning trade, 0.2% higher than 1.21109 at the UK close yesterday.

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Commodities: Gold dips as oil holds steady

Gold trades $1861.2 per ounce, down 0.4% from $1869.5 per ounce at 1630 GMT yesterday, when it hit its highest level in over two weeks.

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Brent trades at $48.69 this morning, broadly level from $48.73 at Tuesday’s close, while WTI has dipped to $45.56 from $45.66.

US oil inventory data released yesterday showed there was an unexpected jump in the amount of crude in stock, implying lacklustre demand, although prices are still being buoyed by progress being made with vaccines. Attention is on the EIA’s crude oil stocks change data scheduled to be released at 1530 GMT.

Find out more about trading the volatility in oil here.

Wednesday’s economic calendar

The headline event in Wednesday’s economic calendar is the Bank of Canada’s interest rate decision at 1500 GMT. The central bank is expected to keep its interest rate at 0.25%.

Find out what will happen later this week using our economic calendar, and keep up to date with the latest market news and analysis here.

Time (GMT)

Country

Event

0800

Spain

Industrial Output Cal Adjusted for Oct (YoY)

0800

South Africa

Consumer Price Index for Nov (MoM and YoY)

0800

Hungary

Trade Balance for Oct

0800

Slovakia

Foreign Trade Balance for Oct

0900

Czech Republic

FX Reserves for Nov

0930

South Africa

Business Confidence Index for Oct

1100

South Africa

Retail Sales for Sep (YoY)

1200

US

MBA Mortgage Applications for Dec 4

1200

Mexico

Headline Inflation for Nov

1200

Mexico

Core Inflation for Nov

1200

Mexico

12-Month Inflation for Nov

1500

US

JOLTs Job Openings for Oct

1500

US

Wholesale Inventories for Oct

1500

Canada

Bank of Canada Rate Statement

1500

Canada

Bank of Canada Interest Rate Decision

1530

US

EIA Crude Oil Stocks Change for Dec 4

1800

US

10-Year Note Auction

2000

Argentina

Industrial Output for Oct (YoY)

2145

New Zealand

Electronic Card Retail Sales for Nov (MoM and YoY)

2350

Japan

Producer Price Index for Nov (MoM and YoY)

2350

Japan

BSI Large Manufacturing Conditions Index for Q4 (MoM)

2350

Japan

Money Supply M2+CD for Nov (YoY)

2350

Japan

Foreign Bond Investment for Dec 4

2350

Japan

Foreign Investment in Japan Stocks for Dec 4




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