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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Pound jumps on Brexit deal hopes; US jobless claims dip – as it happened

The skyline of the City of London.
The skyline of the City of London. Photograph: Daniel Leal-Olivas/AFP/Getty Images

With London’s stock market closed for the night, it’s time to wrap up.

Here’s our latest news story on the Brexit talks:

And do watch the website for further developments tonight.

Goodnight. GW

Here’s the BBC’s Faisal Islam on the state of play tonight.

The pound is still holding steady at $1.35 tonight, as traders wait for hard news on the Brexit trade deal talks.

Updated

European stock markets also posted strong gains tonight, as the prospect of a Brexit deal lifted spirits.

Germany’s DAX jumped 1.25%, Italy’s FTSE MIB gained 1.3%, France’s CAC rose 1.1% and the Spanish IBEX rallied by 1.7%.

David Madden of CMC Markets says:

Increased chatter than the UK and the EU will reach a trade deal has boosted sentiment. Equity markets were already up on the session in advance of the optimism surrounding the trade talks, so then the bullish move was turned up a notch.

The Covid-19 crisis is still very much in the news but for now traders are fixated on the UK-EU situation. On the London market, banks, housebuilders, airlines and transport stocks are showing decent gains. The FTSE is seeing its gains capped by the rise in the pound – which has pushed internationally focused stocks like Reckitt Benckiser, AstraZeneca and Diageo into the red.

The smaller FTSE 250 index, which has a stronger domestic focus, rallied more strongly.

It jumped 1.7% to 20297 points, close to the near-10 month high set last week.

Top risers included Virgin Money (+8.4%), budget airline easyJet (+7.3%) and property group Hammerson (+7.3%). Oil and gas explorer Cairn Energy leapt 22%, after being awarded over $1.2bn in a long-running corporate tax dispute with the Indian government.

FTSE 100 closes higher

Britain’s blue-chip FTSE 100 index has closed higher tonight, as reports that a Brexit deal is imminent lift stocks across Europe.

Domestic stocks led the rally in London, with Lloyds Banking Group finishing 7% higher, fellow bank NatWest up 5%, airline group IAG up 6.2%, retailer JD Sports up 4.5%, and housebuilders Persimmon, Berkeley Group and Barratt Development all up over 4%.

Energy stocks also rallied, as the oil price also pushed higher after dipping overnight.

This lifted the Footsie up by 42 points to nearly 6496 points, up 0.66%, with some multinational companies dipping due to the strength of the pound.

The FTSE 100 by sector, 23rd December
The FTSE 100 by sector, 23rd December Photograph: Refinitiv

Updated

Tony Connelly of Ireland’s RTE broadcaster has also heard that optimism over a UK-EU trade deal is rising:

Updated

The pound is holding onto those earlier gains - still up over one and a half cents against the US dollar at $1.352, and over one eurocent at €1.109.

Full story: EU countries prepare for possible imminent Brexit deal

Our Brussels bureau chief Daniel Boffey reports that it seems the UK and EU are on the pathway to a deal tonight.

EU states are readying themselves for the possibility of a Brexit deal being struck within the next few hours, by pencilling in a Christmas Eve meeting to start the ratification process.

Ambassadors in Brussels have been told to be available to meet on Thursday if the negotiations come to fruition. Diplomats representing the EU member states are already combing through some of the the 2,000 pages of legal text that have been agreed.

A vote by the European parliament to give consent to a trade and security agreement with the UK is no longer possible, given the lack of time left before the end of the transition period. The UK exits the single market and customs union in eight days’ time.

The capitals will instead have to agree to “provisional application” of the deal on 1 January, with MEPs having their vote later in the month. The process can still take up to a week, given the need for the treaty to be translated and scrutinised by the 27 governments.

The BBC’s Laura Kuenssberg cautions that the deal isn’t finalised yet, but it could be heading that way tonight...

Here’s Sky News’s Joe Pike:

This latest burst of Brexit deal optimism is also lifting shares in UK companies.

Lloyds Banking Group is now the top risers on the FTSE 100, up 7%, with NatWest Group up 5%,

IAG, the parent company of British Airways, are up almost 6% now.

Housebuilders, who are another bellwether of UK economic prospects, are also rising - with Persimmon and Barratt Development both up 4% today.

This has lifted the FTSE 100 index up by 27 points or 0.4% -- with multinationals dipping due to the jump in the pound (it makes their overseas earnings less valuable in sterling terms)

The smaller, domestically-focused FTSE 250 index has jumped 1.6%, with budget airline easyJet up 8%.

The pound has also jumped against other major currencies, including a 1% gain against the euro to €1.11.

The Financial Times is also reporting hopes that a Brexit deal could be agreed before Christmas:

Hopes were rising on Wednesday that a Brexit trade deal could be sealed within hours as intensive talks continued between EU and UK teams to secure an agreement before Christmas.

British officials said that while the two sides were still arguing over fisheries and other issues — including competition rules for a “level playing field” — a deal as early as Wednesday evening was “possible”, with Boris Johnson in close contact with European Commission president Ursula von der Leyen.

European diplomats agreed that a deal could be nailed down before the Christmas break, with one predicting an agreement as soon as Wednesday night.

FT: Progress in Brexit talks raises hopes of imminent trade deal

Pound jumps on Brexit deal hopes

Back in the markets, the pound has jumped on reports that a Brexit deal could be in sight.

Sterling has surged by over one and a half cents to $1.352, towards the 31-month highs seen last week.

The pound vs the US dollar
The pound vs the US dollar Photograph: Refinitiv

The rally comes as Reuters reported that a deal was close, saying:

A trade deal between Britain and the European Union is imminent and could be agreed as early as Wednesday evening, a senior EU diplomat said.

The diplomat, who spoke on condition of anonymity, said EU member states would have to approve a provisional application of the deal with effect from Jan. 1 because there is not enough time for it to be ratified by the European Parliament.

Reuters is also reporting that the EU had started to prepare for the provisional application of a UK trade deal:

European Union member states have started to prepare their procedure to implement a new trade deal with the United Kingdom from January 1, three diplomatic sources in the bloc told Reuters, indicating that agreement could be imminent.

Both sides are racing to avoid a turbulent split when Britain leaves the EU’s orbit on December 31, 11 months after it formally quit the bloc and entered a transition period keeping it in the EU customs union and single market.

The two sides have given a dizzying array of conflicting signals: Britain on Wednesday said that two significant issues - fishing and competition - still remained to be resolved and that there had not been sufficient progress for a deal.

But during a meeting with the EU’s executive, the European Commission, which is negotiating with Britain on behalf of all the 27 member states in the bloc, national diplomats in Brussels were told to be ready for a meeting on Thursday should a deal come.

“It seems the deal is pretty much there. It’s a matter of announcing it today or tomorrow,” said one EU diplomat.

More here: EU acts to prepare path to Brexit trade deal, EU sources say

In another sign of the impact of Covid-19, US household spending fell 0.4% in November - for the firs time in seven months.

Personal incomes fell 1.1 per cent in November from the previous month, further underlining the need for the new stimulus package.

Although the number of new US jobless claims dropped last week, it’s still higher than in the autumn, before the resurgence of coronavirus cases.

And it’s also many times higher than before the pandemic (when initial claims were typically in the low 200,000s).

Here’s some early reaction to the latest US jobless claims figures from Heather Long of the Washington Post:

And also Joseph Brusuelas of accountancy firm RSM.

US initial jobless claims fall, but still high

Just in. The number of Americans filing new unemployment claims has fallen, but remains painfully high as Christmas approaches.

Around 803,000 new initial jobless claims were filed last week on a seasonally adjusted bases, down from 892,000 the previous week (that’s been revised up from 885k).

That’s lower than expected, but still higher than any week before 2020.

[If you strip out seasonal adjustments, then 869,000 new initial jobless claims were filed (a drop of 73,000 week-on-week).]

In addition, there were another 398,000 new claims for jobless support under the Pandemic Unemployment Assistance (PUA) programme (down nearly 57k) from self-employed workers and freelances who can’t file initial claims.

Updated

Our latest snapshot on the UK economy shows that the economic picture has darkened in recent weeks, with retail sales falling and job losses rising, and growth stalling even before the new strain of Covid-19 triggered tighter restrictions:

Lufthansa flies 80 tonnes of fresh food to UK amid shortage fears

Lufthansa is flying in 80 tonnes of fruit and vegetables to help restock UK supermarket shelves amid fears that the lifting of a French blockade will not prevent some shortages in stores.

The German airline said it was carrying a cargo of lettuce, cauliflower, broccoli, strawberries and citrus fruits, and considering whether to put on additional special cargo flights to meet demand.

It said a B777 Freighter aircraft would arrive at Doncaster Sheffield airport at lunchtime on Wednesday.

The flight comes as supermarkets and their suppliers scramble to find alternative ways to stock shelves as thousands of lorries and vans remain stuck outside Dover.

European markets are holding onto their earlier modest gains, as investors keep an eye on the US stimulus situation.

European stock markets, 23rd December

Edward Moya of OANDA says the markets expect that a compromise on the stimulus deal will be found, although it’s not clear exactly how we’ll get there...

Trump is making a push for $2,000 checks, much more than the $600 that has already been agreed upon. The current deal that Congress put together is a band-aid fiscal support solution that keeps unemployment benefits and support for small business lasting till March

Trump wants a substantial coronavirus stimulus package that might make a difference for households. Something needs to get done by December 28th and right now markets are expecting that we could see a last-minute tweak that provides more stimulus for Americans.

With less than two weeks to the two Georgia Senate runoff races, Republicans do not want to jeopardize Trump’s support ahead of the elections that will determine who controls the Senate. A bill is still widely expected before December 28th, how we get there it is not clear.

The Old Arcade pub on Church Street, Cardiff
The Old Arcade pub on Church Street, Cardiff Photograph: Tom Jenkins/The Guardian

Pub news: Around 1,300 jobs have been saved after family-owned Welsh brewer SA Brain & Co has handed over the running of its 156 pubs to Marston’s.

Brains, a historic part of the UK beer industry, has decided to let Marstons operate the sites after the coronavirus pandemic threatened their closure.

My colleague Jasper Jolly explains:

Brains, whose pubs are mainly based in south and west Wales, said it had come “under significant financial pressure” during the pandemic, as restrictions mean pubs must remain closed except for takeaway and delivery.

The company closed its entire pub estate on 4 December after the announcement of a ban on alcohol sales and enforced 6pm closing across Wales to try to contain a worsening Covid-19 outbreak. Remaining open under those restrictions was “not a viable option”, Brains said.

The pubs will still be run under the Brains brand, and keep selling its beer - a relief for fans of its ‘legendary’ SA bitter.

Updated

Wall Street futures dropped overnight after Donald Trump took that blast at the US stimulus bill, but have now recovered, and are pointing to a slightly higher open.

The Street reckons investors are hopeful that Trump’s demand for larger stimulus payments won’t kill the bill.

House Democrats offered to re-work the deal to boost the COIVD relief payments, but there was little indication that Republican Senators, who control the upper chamber, were willing to add to a spending level they were already uncomfortable with.

Trump’s intervention doesn’t kill the deal, however, given that it earned 92 votes in the Senate and 359 in the House, levels that would easily override any Presidential veto.

U.S. equity futures seemed to reflect that calculus in overnight trading, with contracts tied to the Dow Jones Industrial Average indicating an 80 point opening bell gain and those linked to the S&P 500 suggesting a 10 point bump to the upside, albeit in volumes that were much lower than an average trading day.

Police cars passing by lorries queueing on M20 motorway to enter the port of Dover
Police cars passing by lorries queueing on M20 motorway to enter the port of Dover Photograph: Peter Nicholls/Reuters

Britain’s retail industry lobby group has warned that there could be issues with the availability of some fresh goods in the UK until the backlog of trucks at the port of Dover is cleared and supply chains return to normal, Reuters reports:

Andrew Opie, director of food & sustainability at the British Retail Consortium, says:

“It is good news for consumers as the French borders have now reopened, however it is essential that lorries get moving across the border as quickly as possible.

“Until the backlog is cleared and supply chains return to normal, we anticipate issues with the availability of some fresh goods.

Supermarkets warned on Monday that lettuce, broccoli and citrus fruit could run short unless the ban on hauliers was lifted (as happened last night). Tesco, the UK’s biggest supermarket chain, has introduced limits on certain stock, including toilet roll, eggs, rice, soap and handwash, to prevent stockpiling leading to shortages.

The US dollar has dipped so far today, suggesting investors are still optimistic that the stimulus package will get passed -- perhaps even with larger payments for US households, as president Trump demands.

Raffi Boyadjian of XM says Trump’s threat to block the stimulus package has ‘tempered the mood’ in the markets, but there’s also relief that France has reopened its border with the UK again.

While it seems more likely than not that Trump will eventually sign the stimulus bill, it may be wrong to underestimate his determination to frustrate life for the incoming Biden administration as much as possible.

But for now, optimism is the order of the day as investors were encouraged from some easing of the UK travel ban in Europe. France has decided to reopen its borders to UK lorry drivers coming through the Channel but will only allow those that test negative for the coronavirus.

Currencies were similarly buoyed by the receding fears that the new virus strain would significantly hamper the global recovery, with progress on reopening the French-UK border underlining the positive tone.

The US dollar has lost ground against the Australian and New Zealand dollars, as well as the pound and the euro
The US dollar has lost ground against the Australian and New Zealand dollars, as well as the pound and the euro Photograph: XM

The Financial Times points out that president Trump is pushing for a more generous tax breaks for restaurant business meals (a measure designed to encourage fine dining and quaffing).

Mr Trump specifically took issue with a provision that critics have called the “three martini lunch” tax break — which allows businesses to fully deduct corporate food and beverage expenses from their federal taxes — saying it was not generous enough.

The president, who owns a chain of hotels and resorts, has long pushed for the tax break, claiming it would boost the restaurant industry. Democrats reportedly accepted the measure in exchange for an expansion of tax credits for low-income Americans, but imposed a two-year limit on the deductions.

“This two-year period must be withdrawn, which will allow the owners to obtain financing and get their restaurants back in condition,” the president said. “Congress can terminate it at a much later date, but two years is not acceptable, it’s not enough.”

More here: Trump demands changes to $900bn US stimulus bill

Jeffrey Halley of OANDA says investors are resisting pressing the sell button until the situation around the US stimulus deal is clearer.

The President has stated that direct payments to families are too low and has suggested to Congress that it tries again. In particular, he appears to be riling against the foreign aid allotments and a number of other pork-barrel giveaways buried in the 5,600-page document. Further complicating the issue, is that the $1.4 trillion government funding bill for 2021 is attached to the legislation.

If the President does veto the bill, the government will shut down effectively on the 28th of December.

Marc Ostwald of ADM Investor Services says Trump’s threat is part of his ‘scorched earth’ approach since losing last month’s election:

Trump’s threat to block the US stimulus bill has all the hallmarks of populism (he is in favour of a one off Payment of $2,000 as opposed to the bill’s $600, and wants cuts to envisaged foreign spending), but also of the scorched earth policy that has been so evident since the election.

European markets open higher

Europe’s stock markets have opened higher.

Germany’s DAX and France’s CAC have both gained over 0.5%, despite president Trump’s surprise dissatisfaction with the US stimulus deal.

The UK’s FTSE 100 is down 0.2%, though, with multinational stocks being held back because the pound is a little stronger (up half a cent at $1.342).

David Madden of CMC Markets says sentiment has improved after Monday’s wobble.

The French government started to soften its stance with respect to the two-day passenger and goods ban and that set the tone in European markets yesterday.

The fears of the UK being cut off from the rest of Europe faded [yesterday] and traders bought back into equity markets as they took the view that goods would be freely moving across the English Channel again in the near-term.

Shares in travel and hospitality stocks are gaining ground in early London trading, suggesting fears over the UK’s new Covid-19 strain may be easing.

Airline group IAG is the top riser, up 3%, with jet engine maker Rolls-Royce gaining 1.75%, and hotel group Whitbread rising 2%. They all fell sharply on Monday, after the UK imposed its tougher new Christmas lockdown.

But takeaway firm Just Eat and online grocer Ocado are both down around 1%.

Oil dips

The jack-up rig Maersk Invincible, located in the middle of the North Sea.

The oil price has dipped today, as traders digest President Trump’s threat not to sign the long-awaited US stimulus bill, and monitor the latest Covid-19 developments.

Brent crude is down 1% at $49.55, away from the nine-month highs seen last week, while US crude has dipped a similar amount to $46.50.

Stephen Innes, chief global market strategist at AXI, says Trump’s move “certainly didn’t help matters”, but remains hopeful that the aid package will be approved.

No one will walk away from a stimulus deal; it is all about what contours get changed. And frankly, I do not think Main Street will mind getting a $2000 surprise stocking stuffer, and neither will the markets.

Ravindra Rao, vice president of commodities at Kotak Securities, says the travel disruption in the UK is also a factor:

“This is the holiday period, when people go out and that prompts fuel demand. But now, a majority of flights have been cancelled to and from the UK, so this is going to impact oil demand (overall),”

Introduction: Trump's stimulus veto threat puts markets on edge

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

It’s the last full trading day before Christmas, and the City is focused on some familiar themes - Brexit, the US stimulus package, and the deadlock at Britain’s ports.

Last night, Donald Trump threw a late curveball into the mix - threatening not to sign the $892bn bipartisan stimulus bill approved by the Republican-controlled Senate and the Democrat-held House, unless it includes larger payments to help Americans through the economic crisis.

In an unexpected development, the US president laid into the proposal, demanding that Congress to “send me a suitable bill or else the next administration will have to deliver a Covid relief package”.

Trump call the bill a “disgrace” (even though Treasury secretary Steven Mnuchin has helped negotiate it, and has welcomed it). He insists that the $600 cheques being provided to most Americans should be bumped up to $2,000, or $4,000 for a couple, saying:

“The $900 billion package provides hardworking taxpayers with only $600 each in relief payments and not enough money is given to small businesses.”

“Congress found plenty of money for foreign countries, lobbyists and special interests, while sending the bare minimum to the American people who needed it wasn’t their fault.”

The idea was promptly welcomed by House Speaker Nancy Pelosi, who sounds keen to pep up the package as Trump demands.

Larger stimulus checks would probably be welcomed by the markets, as well as hard-pressed families.

But Trump’s late move has surprised investors (those who haven’t clocked off for a festive break, anyway). Kyle Rodda of IG explains:

The developments stoked concern in the market that after months of bartering and dysfunction in Congress in getting a much needed package together, it may fall down at the final hurdle.

The UK and EU are continuing to push for a Brexit trade deal before Christmas, with Commission president Ursula von der Leyen taking personal control of negotiations last night.

Fisheries remain the sticking point, with the two sides now at odds over tens of millions of fish - a tiny fraction of the cost of no deal.

As our Brussels bureau chief Daniel Boffey explains:

The EU has said it is willing to lose 25% by value of the fish its fleets catch in UK waters. The UK has proposed the repatriation of 35% – a potential difference of €63.8m (£58.1m).

However, Barnier said the British offer did not include pelagic fish such as anchovies, tuna and mackerel, meaning the loss of annual income would be closer to €230m a year.

Rail, air and sea services between the UK and France are resuming this morning after the French government agreed to ease its travel ban over fears about the new strain of Covid-19.

A mass Covid-19 testing programme for lorry drivers is now getting underway, following an agreement to reopen the border between France and the UK - but travellers and truck drivers will need a negative test.

Passengers from the UK disembarked from ferries in the port of Calais early this morning, but the huge backlog of thousands of lorries and vans will take days to clear. This leaves food transport firms facing heavy disruption over the crucial Christmas period, just as the Brexit transition end looms.

There’s also a flurry of US economic data this afternoon as we clear the decks for Christmas, including the latest weekly jobless data (which hit a three month high last week).

The agenda

  • 1.30pm GMT: US durable goods orders for November
  • 1.30pm GMT: US weekly jobless claims
  • 3pm GMT: Michigan consumer sentiment index
  • 3pm GMT: US home sales data for November

Updated

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