Agreement Or No Agreement, That Is The Question?

The FTSE trailed behind its peers on Tuesday, weighed down by a Brexit boosted pound, whilst equities across Europe and on Wall Street cheered an encouraging start to US earning season.

The pound held gains around $1.2650 as the EU and the U.K. remained locked in talks most of the day. News, late in the European session, that the two sides are closing in on a deal late has sent the pound spiking towards $1.28. Whilst there has still been no official confirmation of a draft Brexit bill being close to agreed, pound traders are rolling with it. With sterling at these levels’ investors are more certain than not that the U.K. will leave the EU with a deal. Traders will remain glued to headlines which are the exclusive driver of the pound right now.

The stocks more exposed to the UK economy, such as house builders and domestically focused banks, RBS and Lloyds soared to the top of the FTSE, whilst multinationals which earn revenues and profits abroad fell to the bottom of the FTSE hit by the unfavourable exchange rate. Given that these multinationals make up around 70% of the FTSE 100, the FTSE failed to move much beyond the flat line, even as bourses in Europe and on Wall Street soared over 1%.

FTSE 250 Jumps 1.5%

Whilst the FTSE 100 was struggling under the weight of the stronger pound, the same could not be said for the mid-caps. The FTSE 250 surged 1.5% as the domestically exposed stocks, which are more vulnerable to a no deal Brexit cheered the progress towards a deal. The likes of Travis Perkins, Capita and Hammerson dominated the upper reaches. OneSavings Bank was up over 10% for the second time in under a week.

Earnings Lift Wall Street

Stocks on Wall Street bounded higher out of the blocks after robust Q3 results from JP Morgan Chase, United Health and Johnson & Johnson impressed. Given that investors have been concerned over the health of the US economy, the results have helped ease those concerns. The rally in stocks that has come off the back the earnings is a reflection of investors relief that the US – China slowdown has infiltrated through all sectors of the economy.

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