Barclays helps drive surge for banking stocks

Strength in UK stocks has been helped by an impressive Barclays earnings report. With the bank lowering Covid impairment charges, there is a chance the fears of an economic collapse in Q4 could be overblown. Meanwhile the services sector is suffering in mainland Europe, as fresh lockdowns spark contraction in face-to-face business activity.

• Brexit breakthrough fails to lift

• GBPUSD Services weakness highlights damage from fresh lockdown measures

• Barclays help to lift entire banking sector

Sterling weakness has helped push the FTSE 100 higher today, with the rise in the dollar dominating despite an apparent breakthrough in Brexit talks. With the French appear willing to cede ground on the topic of fishing rights, we are finally starting to see one of the red lines soften somewhat with just 10-weeks until Brexit. Meanwhile, a fresh post-Brexit trade deal with Japan has provided another boost as traders look for signs that the government is attempting to lessen the hard landing on 1 January.

Rising fears of a second economic collapse in the eurozone helped drive EURUSD lower today, with a slump in German and French services activity highlighting the gradual retraction in person-to-person business. Unfortunately, the latest restrictions to shops, pubs, and restaurants will continue to hurt the services sector in the coming month, yet the UK will hope Rishi Sunak's latest measures can help alleviate much of that pain.

Barclays have provided a welcome boost to the banking sector today, with a huge write-down in Covid impairment charges laying the groundwork for similar moves in a bank-heavy week of earnings to come. The fear that the second wave of coronavirus lockdowns would cause huge loan defaults appears to have been overplayed, with Rishi Sunaks recent financial support package likely to lessen job losses and bankruptcy. With traders seemingly willing to look beyond the current raft of lockdowns to help drive travel stocks higher, todays Barclays numbers could spark a similar resurgence for banking stocks.