(Sharecast News) - London stocks edged higher in early trade on Thursday, supported by hopes of a Brexit deal and further US stimulus, as investors eyed the latest policy announcement from the Bank of England.
At 0845 GMT, the FTSE 100 was 0.3% firmer at 6,593.17, while the pound was up 0.5% against the dollar at 1.3575, reaching its strongest level since May 2018 on the back of Brexit optimism and greenback weakness.
Spreadex analyst Connor Campbell said: "Some projection improvements from the Federal Reserve, continued optimism regarding US stimulus, and hopes that a last-gasp Brexit deal can still materialise were all factors on Thursday morning.
"Though the Fed left things unchanged policy-wise, its forecasts for this year and the next got a polish - it is now expecting the US economy to contract by 2.4% in 2020, before rebounding by 4.2% in 2021. The unemployment rate, meanwhile, is set to fall back to 5%, not too far off where it was at the start of the year.
"As for fiscal stimulus, Congress is quickly running out of time to get the $908bn bill passed before Friday evening's shutdown. Confirmation of the relief package could be the thing the markets need to kick-start a Santa rally heading into Christmas week.
"On the surface, the chances of a Brexit deal were dealt a blow after the announcement of a parliamentary recess from Thursday. However, some have speculated this is just part of the bluster of negotiations, and that MPs could well be recalled if an agreement does materialise in the next few days."
The BoE rate announcement is due at midday, with no change expected after it announced an extra £150bn of quantitative easing last month.
In corporate news, WPP rallied as it said it would increase its dividend each year starting in 2020 and pay out about 40% of headline earnings per share.
Watches of Switzerland gained as it upgraded its full-year sales guidance after a stronger-than-expected first-half performance and solid start to the third quarter.
Man Group was boosted by an upgrade to 'outperform' at Credit Suisse, while Schroders was higher after an upgrade to 'neutral' by the same outfit.
On the downside, travel food outlet operator SSP Group was in the red after saying it expects an 80% fall in first quarter sales as the second wave of Covid-19 hit its UK and European markets with volatility continuing into the second three months of the financial year.
The owner of Upper Crust reported an annual loss of £425m compared with £197.2m profit as the pandemic battered that global travel industry. Revenue slumped 47% on a constant currency basis to £1.43bn.
Avon Rubber tumbled after the respiratory equipment manufacturer warned approval processes related to several US contracts had been delayed, pushing out deliveries and associated revenues until the new year.