European Market Open: Indices mixed amid ‘strong possibility’ of no-deal Brexit

The two sides remain far apart on three major sticking points – fisheries, governance and maintaining a level playing field.

Brexit 5

No-deal Brexit a ‘strong possibility’

Hopes that a last-minute Brexit deal will be agreed are waning as UK prime minister Boris Johnson warned there is a ‘strong possibility’ of a no-deal Brexit as negotiators continue to try and deliver material progress by Sunday. Meanwhile, the EU has also started to propose no-deal contingency measures, starting with ones to keep planes and haulage trucks flowing over the Channel.

The two sides remain far apart on three major sticking points – fisheries, governance and maintaining a level playing field.

Fresh stimulus for the EU

EU leaders have agreed on a new EUR1.8 trillion package to help the bloc bounce back from the coronavirus crisis. The first day of the European Council summit has been productive after Hungary and Poland, which had previously opposed the budget, were convinced to drop their objections.

That came on the same day the European Central Bank launched new stimulus to help the eurozone recover. While the central bank left interest rates alone, it did raise its bond-buying programme and introduced new liquidity for banks. 

European indices to open slightly lower

The Euro STOXX Index is called to open marginally lower at 3415.5 from its closing price on Thursday of 3517.4.

Germany’s DAX is set to open lower at 13271.0 from 13286.7 at yesterday’s close, while France’s CAC 40 is called to open at 5536.4 compared to 5542.3. Both indices have lost ground this week, with the DAX down 0.1% and the CAC having shed 1.3%.

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FTSE 100 called higher after closing at new high

The FTSE 100 is set to gain further ground today and is called to open 0.1% higher at 6603.8 from 6597.2 at the close on Thursday – when it ended the day at its highest level since early March. The index is up 0.7% over the week so far.

Top stock news

The top news from European stocks this morning is:

UK regulator gives banks green light to resume dividends

UK regulators have given the green light for banks to resume dividend payments after asking them to suspend payouts and preserve cash when the coronavirus crisis rocked global markets earlier this year. The Prudential Regulation Authority said ‘banks are resilient to a wide range of economic outcomes, including economic scenarios that are materially more severe than current central expectations.’ The regulator added that ‘there is scope for banks to recommence some distributions should their boards choose to do so, within an appropriately prudent framework.’

Rolls Royce to return to positive cashflow in late 2021

Rolls Royce said its expectations remain unchanged as its business continues to be hard-hit by the coronavirus pandemic. The company recently completed a large rights issue to shore up its balance sheet and said on Friday that it expects to return to positive cashflow ‘at some point during the second-half of 2021’.

Calisen recommends £1.4 billion takeover

Smart energy meter company Calisen, which only listed at the start of the year, said it is recommending a £1.4 billion takeover offer for the company. It said the offer is worth 261 pence per share in cash, a premium to the current share price and above its IPO price of 240p.

GlaxoSmithKline and Sanofi vaccine hit by setback

Sanofi has revealed development of a coronavirus vaccine with GSK has been hit by a setback. The latest data shows the vaccine prompted the desired immune response from younger people but that response in older adults was not as good as hoped. As a result, the pair intend to launch a Phase 2a study in February, representing a major delay considering a Phase 3 study was due to be launched by the end of the year.

Novartis secures EU approval for cholesterol drug

Novartis said it has secured approval from the EU for Leqvio, a drug that helps lower cholesterol. The Swiss pharmaceutical firm purchased the drug last year for $9.4 billion and expects it to be what is known as a blockbuster drug.

Zurich Insurance to buy MetLife for almost $4 billion

Zurich Insurance has revealed its subsidiary has agreed to buy the property and casualty business of US outfit MetLife for $3.94 billion.

Banco BPM reported to be considering merger

Reuters reports this morning that Italian outfits Banco BPM and BPER Banca are considering a merger during the first half of 2021. The move comes after Banco BPM failed to break ground during initial talks about a deal with UniCredit.

Louis Camilleri quits Ferrari and Philip Morris

Louis Camilleri has quit as the chief executive of Ferrari after two and half years in the job. The company’s chairman John Elkann will take over in the interim period. Camilleri has also separately said it will quit his role as executive chairman of tobacco giant Philip Morris. 

Forex: Dollar falls as yen strengthens

City Index analyst Tony Sycamore writes this morning about how Brexit continues to weigh on GBP/USD.

The most drastic movements in the currency markets this morning, according to data from Reuters, are as follows:

FX Pair Price Net Change
USD/JPY 104 -0.20%
USD/INR 73.554 -0.19%
USD/BRL 5.0256 -0.14%
GBP/JPY 138.56 -0.05%
EUR/JPY 126.48 -0.03%

Commodities: Oil prices break through $50 mark

The progress being made with the rollout of coronavirus vaccines, with the UK and Canada having approved their first ones and the US set to authorise one as early as this week, is giving markets confidence that demand for oil will increase going forward.

Brent trades at $50.29 this morning from $50.38 at Thursday’s close, when the benchmark breached the $50 mark for the first time since early March. WTI trades at $46.99 from $47.03 yesterday. Attention is on the Baker Hughes US oil rig count at 1800 GMT.

Find out more about trading the volatility in oil here.

Gold trades at $1836.0 per ounce this morning compared to $1836.7 at the close yesterday as the safe-haven continues to edge lower after hitting a two-week high on Monday.

Find out how to trade gold and other precious metals here.

Market-moving events in the economic calendar

The economic calendar is light today. In the UK, focus is on the Bank of England’s financial stability press conference at 0830 GMT, following on from the report being published at 0700 GMT. Attention turns to the US data in the afternoon.

You can view all the scheduled events for today using our economic calendar, and keep up to date with the latest market news and analysis here.

Time (GMT)

Country

Event

0830

UK

Bank of England Financial Stability Report Press Conference

1330

US

Producer Price Index Ex Food & Energy (Nov)

1500

US

Michigan Consumer Sentiment Index (Dec)

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