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London stocks post positive start to quarter; Brexit worries remain

Shashank Nayar and Susan Mathew
·2-min read
The London Stock Exchange Group offices are seen in the City of London, Britain
The London Stock Exchange Group offices are seen in the City of London, Britain

By Shashank Nayar and Susan Mathew

(Reuters) - London-listed shares rose on Thursday on hopes of more U.S. stimulus and signs that the British government would not impose another sweeping national lockdown, but a slide in oil stocks capped gains.

Markets globally held steady after the Trump administration on Wednesday proposed stimulus measures worth $1.5 trillion, including $20 billion of aid for the airline industry.

In Britain, Environment Secretary George Eustice said the government was seeking to avoid a full national lockdown to contain a resurgence in COVID-19 cases, in the interest of preventing unemployment soaring into the millions.

The more domestically focused mid-cap index <.FTMC> rose 0.4%, while the blue-chip FTSE 100 <.FTSE> edged up 0.2%. Defensive plays such industrials <.FTNMX2720>, utilities <.FTNMX7530> and healthcare stocks <.FTNMX4530> were among the top boosts as Brexit concerns remained.

The European Union launched a legal case against the United Kingdom on Thursday for undercutting their earlier divorce deal and a senior UK minister said differences remained in talks on a trade agreement.

"The first piece of good news is that...Brussels has not shut down trade talks," said James Smith, developed markets economist at ING.

"Instead, the EU has signalled it is pursuing legal action against London, but this will take time and doesn't preclude a deal being done in the meantime," he said, adding that the Internal Market Bill was not necessarily a barrier to a deal, and that there have been signs that negotiations have taken a more positive turn.

The FTSE 100 has been range bound over the past month as new restrictions and rising COVID-19 infections offset hopes for an economic revival on the back of fresh stimulus measures.

Sentiment on Thursday was lifted as a survey showed British factory activity grew for the fourth month in a row in September and the sector cut the fewest jobs since before the COVID-19 lockdown.

Oil stocks <.FTNMX0530> slumped 3.4% to a two-month low as crude prices dropped more than 5%, with a rise in OPEC output last month and rising coronavirus cases dampening the demand outlook.

Among individual shares, Rolls-Royce <RR.L> dropped 10.2% after the aero-engine maker said it planned to raise 2 billion pounds ($2.6 billion) from shareholders, 1 billion pounds from the bond market and secure further loans to rebuild its balance sheet after the pandemic.

Retailer Halfords <HFD.L> surged 31.5% to its highest level since June 2019 after it raised its first-half profit outlook as it continued to benefit from a cycling boom during the pandemic.

(Reporting by Shashank Nayar in Bengaluru; Editing by Subhranshu Sahu and Kirsten Donovan)