By Callum Keown
The FTSE 100 and the pound recovered on Tuesday, despite U.K. Prime Minister Boris Johnson warning that a Brexit trade deal was looking “very, very difficult at the moment.”
The U.K.’s blue-chip FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +1.04% turned positive in late afternoon trading, having slipped 0.5% in the morning, while the more domestically-exposed FTSE 250 /zigman2/quotes/210598417/delayed UK:MCX -0.10% was 0.4% down, as the prospect of a ‘no-deal’ scenario loomed larger in investors’ minds. The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.0498% initially continued its decline , falling 0.5%, before recovering to trade 0.1% down at $1.3360.
The temporary bounce back came after the U.K. said it will withdraw controversial clauses from its internal market bill relating to Northern Ireland. The U.K. had previously said it would withdraw those clauses if a trade deal was reached. The statement said the move protects the Good Friday peace agreement “in all its dimensions.”
Citi analysts said that while the agreement would apply with or without a trade deal it would be an odd move and odd timing for the Northern Ireland issues to be resolved only for a ‘no-deal’ exit to be reached and tariffs imposed.
“This surprise shows that solutions are still possible, and may help re-build some trust,” they said. “This could also suggest at least some expectation on the U.K. side of a zero tariff agreement. Our base remains a zero-tariff free trade agreements between the U.K. and the EU,” they added.
Johnson will travel to Brussels for a face-to-face meeting with European Commission President Ursula von der Leyen in the coming days, with the chances of a deal between the U.K. and European Union still in the balance. The U.K. left the EU on Jan. 31 but the two sides must reach a deal over their future trading relationship before the transition period ends on Dec. 31.
While admitting a deal looked “very tricky” on Tuesday, Johnson also said: “You’ve got to be optimistic, you’ve got to believe there’s the power of sweet reason to get this thing over the line,” in a Sky News interview at a London hospital.
CMC Markets analyst David Madden said Johnson’s scheduled visit to Brussels had “tempered some of the bearish sentiment because the meeting indicates there is still a possibility a no-deal situation will be dodged.” But he noted that the bulls were watching from the side lines.
When it came to markets, the uncertainty over Brexit overshadowed a historic day, as the U.K. began its rollout of the COVID-19 vaccine from U.S. drugmaker Pfizer /zigman2/quotes/202877789/composite PFE -0.63% and its German partner BioNTech /zigman2/quotes/214419716/composite BNTX -1.62% .
Margaret Keenan, 90, was the first person to be given the jab as she was injected at University Hospital in Coventry, England, shortly after 6:30 a.m. GMT. Keenan, who turns 91 next week, told the BBC : “I feel so privileged to be the first person vaccinated against COVID-19, it’s the best early birthday present I could wish for, because it means I can finally look forward to spending time with my family and friends in the new year after being on my own for most of the year.”
She was followed by 81-year-old William Shakespeare from Warwickshire. Vaccinations began in about 70 hospital hubs across the U.K. on Tuesday.
The U.K. has received 800,000 doses, enough for 400,000 people, and is expecting to have 4 million by the end of the year. People over the age of 80 and health-care staff are being given priority in the initial stages of the mass immunization program.
Shares in Ashtead /zigman2/quotes/200232063/delayed UK:AHT -0.17% rose close to 4%, as the construction-equipment company raised its full-year guidance after a “resilient” performance in the first half of the year.
Ferguson’s /zigman2/quotes/209006722/delayed UK:FERG +1.91% stock edged higher, as the plumbing-and-heating-parts company’s profits jumped in the first quarter, driven by demand for home improvements in the U.S.
Electricity suppliers SSE /zigman2/quotes/204546319/delayed UK:SSE +0.20% and National Grid /zigman2/quotes/208805676/delayed UK:NG -0.82% were among the FTSE 100’s biggest risers, after the regulator Ofgem cut the returns that energy networks can give to shareholders by less than previously announced.