UK stocks dropped deeper into negative territory at midday on Friday after the European Union said no deal on Brexit was the most likely outcome of stalled talks that have dragged on to the 12th hour.

A ultimate decision is expected on Sunday.

Adding to the negative mood were record virus infections in Germany and the delays on a possible vaccine being developed by GlaxoSmithKline (GSK) and French pharma group Sanofi. 

Later today the US will report the keenly watched producer prices data for November.

At 12:00, the FTSE 100 was down 1% at 6,536 points.

FALLING BANKS

Banks were in focus after the regulator said it would allow lenders to restart capital pay-outs in the form of dividends and share buybacks.

However, any distributions by large banks for this year should be "prudent" and fall within temporary "guardrails" published by the Prudential Regulation Authority.

Shares were mixed, with Barclays (BARC) dipping 4.4% to 136p and NatWest Group (NWG) losing 6.4% to 151p while HSBC (HSBA) lost 1.2% to 398p and Standard Chartered (STAN) dropped 2% to 468p.

Shares in drug maker GlaxoSmithKline traded up slightly at £14.21 despite the announcement the firm was delaying its Covid-19 vaccine programme, run in conjunction with French pharmaceutical maker Sanofi, due to a weak response in elderly patents during Phase I and Phase II trials.

The ‘insufficient response’ in older adults means the vaccine needs refining with a higher concentration of the antigen ‘in order to provide high-level immune response across all age groups’. Glaxo doesn’t expect its drug to be available until the final quarter of next year assuming further trials are successful.

SCREW TIGHTENS ON ROLLS

Aero engine maker Rolls-Royce (RR.) descended 9% to 115.7p after a trading update which showed the civil aerospace business was still suffering from the fall-out of travel restrictions with large-engine flying hours still almost 60% below 2019 levels.

The firm reaffirmed its target of turning cash-flow positive ‘at some point’ in the second half of next year and of generating at least £750 million of positive free cash flow the following year, but investors seemed unimpressed.

FTSE 250 smart meter provider Calisen (CLSN) saw its share price surge almost 25% to 258p after agreeing a £ 1.43 billion take-private deal.

Coming less than a year after its initial public offering (IPO), the firm has agreed to be bought by a consortium of infrastructure funds, including asset management giant BlackRock. The all cash deal will see shareholders get 261p per share, a 50.4% premium to the average share price over the past three months, but just 8.8% more than the 240p February IPO valuation.

House builder Bellway (BWY) issued a more positive trading update, covering the 17 weeks from August to November, citing strong demand for new homes. Reservations were up 6% on the same period last year and the order book of close to 6,200 homes was valued at £1.77bn, an increase of nearly 19%.

The firm also raised its forecast for completions for the full year to July 2021 to around 9,400 homes, an increase of 25% on the previous year. Notwithstanding, shares drifted 2.4% lower to £26.96.

There was a more positive response to the latest trading update from London estate agency Foxtons (FOXT), which benefitted from the unlocking of the housing market with an 11% increase in house sales in the last two months.

The firm also announced a plan to buy back up to £3 million of shares as a reflection of its strong capital position. The shares nudged-up 0.3% to 44.14p.

Shares in air-conditioning equipment maker Volution (FANjumped 13% to 289p after it revealed that earnings for the new financial year would be ‘significantly ahead of expectations’ thanks to strong organic growth and the firm hitting its 20% operating margin target a full eight months ahead of target.

Like-for-like sales rose by nearly 8% in Europe and 18% in Australasia thanks to new product launches and market share gains.

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Issue Date: 11 Dec 2020