FTSE higher on China US talk reprieve

The FTSE and most European gauges are firming up this morning, helped by a good session in Asia and a positive close on Wall Street Tuesday. President Trump seems for the time being to have softened his stance on the deadline for a deal on the Sino-US trade talks, infusing global markets with a light helping of optimism. The 1 March deadline initially put in place by Trump and his Chinese counterpart in December now no longer seems carved in stone, instead the two presidents could meet after China’s annual congress on 5 March.

Sainsbury loses 15%

Sainsbury’s shares are being pummeled this morning after the UK’s competition regulator said it might block the company’s merger with Asda. The Competition and Markets Authority is concerned that the merger will result in higher prices, not only in the chains’ food stores but also across the companies’ network of petrol stations. The options the two supermarket giants were given include selling a number of stores or selling one of the two main brands, neither of which the two companies seem keen to embrace. The CMA’s blow to the deal resulted in an initial 15% loss for Sainsbury shares although they are now starting to recover, while Morrison fell 4.38%. Tesco’s managed to trade sideways, keeping just above the flat line.

Europe losing patience over Brexit

“I am losing my time with this Brexit.” Those were the words of European Commission president Jean-Claude Juncker ahead of a next round of talks with Theresa May in which the PM will try to renegotiate some of the Irish border issues. The PM is hoping to come home with a new deal ahead of the next Brexit vote in Parliament on 27 February. But Juncker’s comments provide evidence that European politicians are losing patience with Britain’s Brexit and are becoming less willing to accommodate any changes to the existing proposal. This, combined with the rising resistance from the Labour party rebels, does not promise that the vote will actually pass next week, making a hard Brexit more likely. However, the currency market seems to disagree, as sterling is trading back above $1.3, although this morning it lost 32 pips. The $1.3 level has recently taken on the role of an informal “hard Brexit level”, weakening below it every time the markets read the political situation as moving towards a 'no solution' result ahead of the end of March.

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