AM update: Brexit divorce part-struck, pound flips, Asian shares surge

Following a night of telephone diplomacy and an agreement with the DUP – no hard border – an EU-UK divorce deal in principle was agreed earlier this morning. Crucially, European Commission President Jean-Claude Juncker confirmed sufficient progress had been made for Brexit discussions to shift to trade. At close to 7am sterling was trading at 1.3480 though it had risen as high as 1.3514 at 5.30am. Sterling traded +0.22% higher against the euro at €1.1477.

Founder of Seven Investment Management Justin Urquhart Stewart told Today sterling may rise today “if only out of the sheer relief that apparently some progress is being made.” He went on on: “And it is no more than relief because it will then depend on the detail." He added that future investing for much of business remains limited because the longer term visibility is so appalling. 

Asia Pacific shares were mostly higher today with the Shenzhen Composite up +1.21% and the Nikkei +1.39% higher. Tech stocks led much of the upwards momentum with South Korea’s Samsung up almost +2.5%. However individually on a stock level there remains considerable volatility still.

Better news for corporate Japan: last night it emerged GDP for the last quarter was up +2.5%. This means Japan has seen growth for seven consecutive quarters. Private Japanese consumption though remains slow. Today, UK industrial production data is out at 9.30am; US non-farm jobs numbers emerge later in the day. 

• UK FTSE 100 7,320.75 -0.37%
• Dow 24,211.48 +0.29%
• S&P 500 2,636.98 +0.29%
• Nasdaq 6,812.84 +0.54%
• Nikkei 225 22,811.08 +1.39%
• DAX 13,045.15 +0.36%
• CAC 40 5,383.86 +0.18%
• Gold 1,251.00 -0.17%
• Oil WTI 56.66 -0.05%

Watch the EU-UK detail – hold off the champagne?

While there will much relief over the EU-UK breakthrough this morning, sterling bulls need to be cautious. Quoted by BBC Business this morning, Markus Ferber, a German MEP and vice-chair of the Economic and Monetary Affairs Committee, said, in effect, hold off the bubbly. 

"The second phase of the negotiations will at least be as tough as the first one. The British side should be under no illusion. The United Kingdom will become a third country like any other. There will be no privileges or special treatment." 

Much is in the detail. While progress has been made on the Irish question, how will it be finessed? Much of what was agreed is not written into law (and possibly subject to interpretation). There also remains, fundamentally, no EU-UK final agreement. What Theresa May achieved last night is only the next step. As the EU-UK text says at the top in the third paragraph (read here), “Nothing is agreed until everything is agreed.” 

A night of telephone diplomacy for Jean-Claude Juncker but real euphoria may have to wait: Shutterstock

Berkeley Group earnings surge

Berkeley Group Holdings released six-month numbers this morning. Earnings are up +35.8% to £533.3m while it estimates there’s £1.5bn of pre-tax profit likely to be delivered in the two years to April 2019. In terms of shareholder returns £8.34 per share has been returned. Berkeley says a further £1 per share will be returned by 31 March.

“While the political context for housebuilding is turbulent,” said Berkeley, “where there is stability, the potential for growth and delivery remains strong. The London Mayor, Sadiq Khan, has set out his priorities very clearly. We support the increased target in the draft London Plan of 66,000 new homes a year. In our experience, the Mayor is open for business.”

Breaking news: Chinese exports climb to an eight-month high with exports in November leaping +12.3% year-on-year.