What to watch: Another Brexit deadline looms, value rotation continues, and Xi crushes Ant

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·5 min read
Britain's Prime Minister Boris Johnson' senior aid, Dominic Cummings, leaves his house in London, Thursday, Nov. 12, 2020. British Prime Minister Boris Johnson's Director of Communications Lee Cain resigned last night.(AP Photo/Alberto Pezzali)
Britain's Prime Minister Boris Johnson' senior aid, Dominic Cummings, will reportedly leave Downing Street by Christmas. Photo: AP Photo/Alberto Pezzali

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Another Brexit deadline looms

Brexit trade negotiations look set to drag beyond yet another deadline, with little sign of an imminent breakthrough between the EU and UK.

After missing UK Prime Minister Boris Johnson’s 15 October deal deadline, talks resumed late last month with experts predicting the new working deadline would be 16 November. EU leaders will hold an informal summit in Berlin at the start of next week and this is seen as the final opportunity for leaders to ratify any potential deal before the year ends.

So far, there is little sign of a deal being tabled by then. The EU’s chief Brexit negotiator Michel Barnier tweeted on Thursday suggesting he was still “looking for level playing fields” in talks.

The progress of negotiations have been further complicated by the ongoing drama in Downing Street. A core group of Brexiteers close to the prime minister appear to be losing sway. Lee Cain, the PM’s chief of communications, quit in a power struggle this week and on Friday multiple papers reported that Dominic Cummings — the architect of Brexit and Johnson’s most powerful advisor — would leave by Christmas.

“I wonder [if] the departure of key Brexit architects from Downing Street means they think they their work is now done?” said Kit Juckes, a global fixed income strategist at Societe Generale.

“EU/UK trade talks will go on into next week, and while time for a deal is definitely running out, the way the pound trades suggests some people are hoping a deal can be struck, or maybe some bears are throwing in the towel.”

The pound was up 0.2% against the euro (GBPEUR=X) to €1.1135 and up 0.4% against the dollar (GBPUSD=X) to $1.3171.

“There is a distinct lack of momentum as traders await the latest twist in the Brexit saga,” said Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown.

Value rotation continues

The rotation away from tech and growth stocks and into value stocks like banks and energy providers continues apace.

Investors around the world started reshuffling their portfolios at the start of the week after news of a potentially successful COVID-19 vaccine developed by Pfizer and BioNTech. Monday and Tuesday saw the two biggest one-day price moves for value against growth since October 2008, according to Barclays.

The rotation continued on Friday, with Lloyds (LLOY.L) and NatWest (NWG.L) among the biggest gainers on the FTSE 100 (^FTSE).

Barclays’ European equity strategy team said on Friday they expect the rotation away from growth and towards value to have more “legs”.

“Based on our recent conversations with clients, it feels most did not participate in this rotation and are thus worried that it will continue,” analysts wrote in a note sent to clients on Friday.

However, Barclays said markets looked “overbought” in the short-term, suggesting recent gains good fade in the next few days and weeks.

Xi crushes Ant

China’s president Xi Jinping personally put Ant Group’s $37bn (£28bn) blockbuster initial public offering (IPO) on ice, the Wall Street Journal reported.

It comes after Ant’s billionaire co-founder Jack Ma criticised the country’s handling of the Chinese economy, citing Chinese officials familiar with the matter.

Following Ma’s comments, president Xi ordered Chinese regulators to investigate and effectively shut down Ant's listing, the report said.

Ant, backed by Chinese e-commerce giant Alibaba (BABA) could have raised as much as $37bn. The mammoth deal was expected to overtake the record $29.4bn set by Saudi Aramco’s (2222.SR) 2019 IPO.

European stocks mixed as COVID cases rise

European stock markets were mixed on Friday morning, as worrying recent COVID-19 figures overshadowed optimism about a possible vaccine.

Major stock markets across the continent and in the UK opened lower before clawing back losses in early trade.

By 10.15am in London, the FTSE 100 (^FTSE) was flat, while the DAX (^GDAXI) was up 0.5% in Frankfurt and the CAC 40 (^FCHI) had risen 0.6% in Paris.

However, analysts said concerns were circulating about the COVID-19 second wave currently sweeping Europe and the US.

“In France, the number of people requiring hospitalisation rose to a record level yesterday, while here in the UK the number of people infected in a single day surged by nearly 50% to over 33,000,” said Michael Hewson, chief market analyst at CMC Markets.

“With both France and the UK already in the midst of a temporary lockdown, there is a concern that unless the case rate slows, any relaxation of restrictions could take longer to unfold, and increase the longer term potential for economic damage along with that.”

Futures were higher in the US. S&P 500 futures (ES=F), Dow Jones futures (YM=F) and Nasdaq futures (NQ=F) were all up 0.9%.

Stocks fell in Asia overnight. Japan’s Nikkei (^N225) fell 0.5%, the Hong Kong Hang Seng (^HSI) dropped 0.3%, and the Shanghai Composite (000001.SS) declined by 0.8%. In Australia, the ASX 200 (^AXJO) fell 0.2%. South Korea’s KOSPI (^KS11) was a notable outlier, rising 0.7%.

Additional reporting by Suban Abdulla

Watch: Top PM advisor Dominic Cummings to quit by new year