UK stocks continue march higher as Brexit negotiations loomOn June 2, 2020 by Thomas Belayneh
By Thomas Belayneh
The FTSE 100 closed up 0.87% as optimism for a swift economic recovery continues to build and infection rates remain rooted at multi-week lows. This was despite news yesterday that Gilead Science’s phase 3 clinical trials of remdesivir showed no statistically significant improvement for covid-19 patients taking a 10-day course of the medication.
Meggitt (Ticker:MGGT), the aerospace and defence company, which is set to be relegated to the FTSE 250, rallied hard today and was up 9.30%. News that Boeing will restart some 737-MAX aircraft production had boosted its stock price recently, but the loosening of strict travel restrictions has provided a further tailwind.
Meggitt produces, among other things, fire protection systems for the 737-MAX’s engines and APUs. The company had cited in its most recent trading update that halting the production of the beleaguered 737-MAX had cost £10 million, alongside a further hit of £10 million related to falls in air traffic as passenger airliners across the world were ground.
Aircraft-servicing is a key driver for the group from which it derives 21% of its revenues, so news of the sort that easyJet will resume 50% of its flights by July and 75% by August further underpins investors optimism.
On the other end of the spectrum, Hargreaves Lansdown (Ticker: HL) fell 4.53%, making it the worst performer on the index, as the investment platform fell from second to sixth in Which’s annual investment platform customer satisfaction survey. Key rivals such as AJ Bell and Vanguard have overtaken Hargreaves Lansdown in the rankings.
Its close ties with Woodford Fund Management, which has notably been embroiled in controversy, as well as charging relatively higher fees for its services.
The company insists that customer dissatisfaction lies predominantly with those who had exposure to Woodford’s funds otherwise the large majority of customers are happy with its services.
However, according to Which’s calculations, assuming one made four purchases and sales of funds, annual fees are higher for investing funds of £10,000 or more on their platform than it is for Vanguard and AJ Bell Youinvest. The margin by which annual fees are uncompetitive versus peers increases, as the amount of funds invested beyond £10,000 also increases.
Turning to broader issues for the FTSE 100, Brexit negotiations are firmly back in the spotlight.
As we’ve come accustomed to seeing over the past few years, an impasse in talks has yet again been reached, as the deadline for extending the transition period looms. Anxiety amongst traders is growing that failure for negotiating teams to manoeuvre out of this tight spot may avail the very damaging possibility of trading with the EU on WTO terms.
The fourth round of negotiations begin this Thursday and buoyant market participants are hoping for news of progress towards agreeing an extension can be reached. Although expectations of a stalemate this week is the consensus, a positive surprises will boost sterling.
Sterling is changing hands against the dollar at around $1.25, which is close to its one-month high.
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