Stocks Reach New Highs Amid Brexit "Deadlock"

Stocks ended higher on Thursday as sterling took a knock following conclusion of the latest round of Brexit talks, with the EU's chief negotiator stating discussions are at a "deadlock."

The FTSE 100 index closed up 0.3%, or 22.43 points at 7,556.24, its highest closing level since June 2.

The FTSE 250 ended up 0.4%, or 83.46 points, at 20,251.24, to set a new closing high, an all-time high. The AIM All-Share also ended at a new closing high, up 0.5%, or 51.13 points, at 1,029.84, having hit a new all-time record of 1,030.32 during the day.

The BATS UK 100 ended up 0.3% at 12,838.74, the BATS 250 closed up 0.4% at 18,453.19, and the BATS Small Companies ended up 0.3% at 12,487.29.

The pound gained minor ground on Thursday morning ahead of the conclusion of the fifth round of Brexit negotiations, but than weakened as UK Brexit Secretary David Davis and EU chief negotiator Michel Barnier held a press conference that saw the latter state he will not recommend that talks should start on the post-Brexit UK/EU trade relationship at next week's European Council summit.

"The continued ascent of the FTSE has had much to do with the negative effect of the disjointed Brexit negotiations, with daily updates seemingly highlighting just how unsuccessful the initial rounds of talks have been," said IG analyst Joshua Mahony. "As time ticks on, the chance of a hard Brexit are heightened."

At the London equities close, sterling was quoted at USD1.3166, down from USD1.3200 at the close Wednesday. The pound also slipped to a four-week low against the euro of EUR0.9033 on Thursday, but recovered to EUR1.1116 by the time markets closed.

Barnier said this week's fifth round of negotiations ended without making any "great steps forward" and there was "deadlock" on the UK's financial settlement, which is "very disturbing for thousands of project promoters in Europe and it's disturbing also for taxpayers."

"This headline quote overshadowed the more conciliatory comments made by the EU's chief negotiator, with Barnier arguing that 'decisive progress' was still within reach 'over the next two months'," said SpreadEx analyst Connor Campbell.

Campbell added the pound "clearly paid more attention to Barnier than his UK counterpart".

On the issue of citizens' rights, Davis said they were confident there would be agreement "soon" on incorporating the final withdrawal treaty into UK law, ensuring EU nationals in the UK would be able to enforce their rights through the UK courts.

On the third major issue being discussed at present, Barnier said negotiations on the status of the Irish border had "advanced" during this week's discussions, but said there was "more work to do in order to build a full picture of the challenges to North-South co-operation resulting from the UK - and therefore Northern Ireland - leaving the EU legal framework."

"It has been another trying day for the pound and it's incredible to think how volatile the currency movements are based purely around comments on the ongoing Brexit negotiations," said UFX managing director Dennis de Jong.

"Despite Barnier declaring there has been a 'new momentum' in the negotiation process, it clearly isn't enough. At this stage, both sides must feel like they’re banging their heads against a brick wall. One thing we can be certain of is that volatility in the currency markets will only increase over the coming months," de Jong added.

In mainland Europe, the CAC 40 in Paris ended slightly lower while the DAX 30 in Frankfurt closed up 0.2% at 12,991.02 - having topped 13,000 points for the first time in its near-30-year history during the day.

The euro was soft at USD1.1843 at the European equities close from USD1.1847 at the same time Wednesday.

Eurozone industrial output expanded at the fastest pace in nine months in August, largely driven by production of capital goods. Industrial production grew by a more-than-expected 1.4% month-on-month in August, faster than the 0.3% rise seen in July, data from Eurostat showed.

This was the biggest increase since November 2016, when output grew 1.6%. Economists had forecast a monthly 0.6% increase.

Stocks in New York were trading lower at the London equities close. The DJIA and the S&P 500 index were both down 0.1%, while the Nasdaq Composite was slightly lower.

Economic data showed a larger than expected drop in US weekly jobless claims, pushing the unemployment rate to its lowest level since February 2001, while US producer prices increased in line with economist estimates in the month of September following another jump in energy prices.

First-time claims for US unemployment benefits in the week ended October 7 fell to 243,000, a decrease of 15,000 from the previous week's revised level of 258,000. Economists had expected jobless claims to dip to 251,000 from the 260,000 originally reported for the previous week.

Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, also slid by 32,000 to 1.889 million in the last week of September.

The producer price index for final demand climbed by 0.4% in September after edging up by 0.2% in August. The increase in producer prices was partly due to another jump in energy prices, which spiked by 3.4% in September after surging up by 3.3% in August.

Excluding food and energy prices, core producer prices still rose by 0.4% in September after inching up by 0.1% in August. Core prices had been expected to rise by 0.2%.

"Thursday's US data, namely a better than forecast core PPI reading and the best jobless claims number for six weeks, only gave more ammunition to the Fed's hawks," said SpreadEx's Campbell.

The data further supports the liklihood the US Federal Reserve raising interest rates before the end of the year, having raised the rate twice so far in 2017. The minutes from the latest Federal Open Market Committee meeting released late Wednesdayshowed a rate rise this year would be warranted, as long as the medium-term outlook remains broadly unchanged.

Two major US banks grabbed attention on the corporate front Thursday, with JPMorgan Chase and Citigroup both topping analyst estimates with their third quarter results.

JP Morgan Chase reported earnings per share of USD1.76 compared to USD1.58 the year before, ahead of analyst estimates for profit of USD1.65 per share. Net income as a total rose 7% year-on-year to USD6.7 billion, with net revenue was also slightly ahead of expectations, rising 3% to USD25.30 billion.

Citigroup, meanwhile, reported net income per share of USD1.42 in the third quarter, up from USD1.24 the year before and ahead of analyst expectations of USD1.32 per share. Net income as a total rose 8% to USD4.13 billion, with revenue up 2% to USD18.70 billion.

On the London Stock Exchange, HSBC Holdings was rooted to the bottom of the FTSE 100, down 1.5%, after the bank promoted John Flint, current head of its retail banking arm, as group chief executive from February 21, when Stuart Gulliver will retire.

At the other end, easyJet was amongst the biggest gainers, up 2.5%, after bankrupt Air Berlin confirmed talks with the London-listed airline and other bidders - in each case in respect of different units of the group - are still continuing. easyJet is thought to be in discussions about acquiring 27 to 30 planes.

That came as Air Berlin sold off certain units to Deutsche Lufthansa for EUR210 million.

Sky closed 1.4% higher, after it made a solid start with its results for the first quarter to the end of September, showing like-for-like revenue growth of 5% to GBP3.30 billion and an 11% lift in earnings before interest, tax, depreciation amortization to GBP582 million. The pay-tv broadcaster added 160,000 new customers in the first quarter, up 51% on the same time last year.

Meanwhile, at Sky's annual general meeting later Thursday, there was a significant vote against the pay packet of its board as well as the re-election of Chairman James Murdoch to the board amid the proposed deal that would see 21st Century Fox wholly-own the company.

Of the votes cast, 29% were against the director's remuneration report, whilst 22% voted against the re-election of James Murdoch, who is also the chief executive of Fox.

In the FTSE 250, Just Eat was the best performer, up 6.5%, after the the UK Competition & Markets Authority provisionally cleared the company's GBP240 million deal to acquire rival Hungryhouse Holdings.

The deal, first agreed in December last year, was referred to an in-depth investigation but the CMA believes the merger is "unlikely" to result in competition concerns as Hungryhouse currently offers "limited competition", flagging growing rivalry in the market from the likes of Deliveroo, UberEATS and Amazon.

N Brown was the worst performing mid-cap, down 5.5%, after the plus-size clothing retailer turned to a first half pretax loss of GBP27.6 million for the 26 weeks ended September 2, compared to a profit of GBP21.1 million the year before, on the back of a large exceptional charge that offset revenue growth.

Exceptional charges of GBP54.9 million related to resolving customer issues over the sale of a flawed protection insurance product, as well as store closures.

On AIM, Independent Oil surged higher to end up 61%. The company said a new report shows its Southern North Sea gas portfolio now has proven and probable reserves of 303 billion cubic feet, almost a nine-fold increase from the previous estimate of 34 billion cubic feet of gas.

Brent was quoted lower at USD55.90 a barrel at the London close, dipping from USD56.32 a barrel on Wednesday.

Meanwhile, gold was at USD1,292.32 per ounce, rising from USD1,288.97 at the same time the prior day.

In the economic calendar on Friday, Japanese foreign investment figures are due at 0050 BST, while China's trade balance and foreign investment readings are at 0300 BST. Germany's September consumer price index reading is due at 0700 BST.

Attention turns to the US in the afternoon, with retail sales and the September consumer price index due both due at 1330 BST. The Michigan consumer sentiment index is due at 1500 BST.

In the UK corporate calendar on Friday, emerging markets-focused asset manager Ashmore Group, investment manager Man Group, and subprime lender Provident Financial are all due to issue trading updates.