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LONDON (Alliance News) - Stocks in London ended lower on Thursday, with the FTSE 100 hurt by a strong pound after Brexit Secretary David Davis said the UK government is prepared to consider paying for the UK to access the European single market post-Brexit.

Oil producers and oil-field service providers featured among a small list of big and mid-cap gainers in London, as they continued to benefit from an increase in crude prices following the OPEC agreement on Wednesday to curb production.

The FTSE 100 index ended down 0.5%, or 30.86 points at 6,752.93. The FTSE 250 fell 0.3%, or 48.41 points, at 17,497.34, and the AIM All-Share closed down 0.7%, or 5.67 points, at 813.33.

The BATS UK 100 fell 0.5% at 11,407.72, and the BATS 250 ended 0.2% lower at 15,895.55, while the BATS Small Companies closed up 0.5% at 10,138.28.

Davis told MPs on Thursday that ministers want to "get the best possible access for goods and services to the European market" after the UK has left the European Union and suggested the UK government is open to the possibility of making contributions to the EU to secure that access.

It is the first time a government minister has openly signalled that money could be handed over to Brussels to secure favourable trading terms with the continent.

Davis also suggested the UK would consider a transitional arrangement with the EU, adding that he wanted Brexit negotiations and new trade rules to be in place within two years of triggering Article 50.

The pound rose against other major currencies, quoted at USD1.2588 at the London equities close, compared to USD1.2482 at the London close on Wednesday. The UK currency reached an intraday high of USD1.2695.

The Markit/Chartered Institute of Procurement & Supply manufacturing Purchasing Managers' Index for the UK dropped to 53.4 in November from 54.2 in October, below expectations of 54.4. There were signs that the weak sterling exchange rate pushed up inflationary pressure. Average purchase prices rose at a pace close to October's near six-year record.

Despite the miss to economist forecasts, analysts said this provided further support to the pound in reaction to rising input costs, which increase the odds of higher consumer prices in 2017, CMC Markets analyst Jasper Lawler said.

"The Bank of England has said it will have 'limited tolerance' for inflation above its 2% objective, suggesting a UK interest rate rise is climbing back onto the table," noted Lawler. The BoE's next Monetary Policy Committee meeting is on December 15.

Meanwhile, Markit said the eurozone final manufacturing PMI rose to 53.7 in November from 53.5 in October, unchanged from the flash estimate.

The same from Germany fell to 54.3 in November from October's 33-month high of 55.0. The initial score was 54.4. France manufacturing PMI dropped marginally to 51.7 from 51.8 in October. The flash reading was 51.5.

Eurostat said the eurozone unemployment rate declined to 9.8% in October from a revised 9.9% in September. This was the lowest since July 2009. Economists had expected the rate to remain unchanged at September's initially estimated rate of 10%.

The French CAC 40 index ended down 0.4% and the German DAX 30 fell 1.0%. The euro stood at USD1.0628 at the London equities close, compared to USD1.0573 at the same time on Wednesday.

In New York, Wall Street was mixed at the London close. The Dow Industrials was up 0.3%, the S&P 500 index was down 0.2% and the Nasdaq Composite was down 1.0%.

The Institute for Supply Management said its manufacturing purchasing managers index for the US climbed to 53.2 in November from 51.9 in October, above economist expectations for a score of 52.3.

Meanwhile, the US Labor Department said first-time claims for US unemployment benefits rose to 268,000 in the week ended November 26 from the previous week's unrevised level of 251,000. Economists had expected jobless claims to edge up to 253,000.

Ian Shepherdson, chief economist at Pantheon Macroeconomics said the Thanksgiving week numbers are "tricky and unpredictable...therefore, tells us nothing about the underlying pace of layoffs".

"We expect claims to drop back to the mid-250s next week, but after that, holiday seasonals can push the numbers around through the middle of January. But we have no reason to expect the trend to change significantly for the foreseeable future," said Shepherdson.

The reports comes ahead of US nonfarm payrolls data on Friday at 1330 GMT, with investors keeping a wary eye on the numbers, as the next Federal Reserve monetary policy meeting looms. The Federal Open Market Committee meets for two days on December 13-14, with the market largely expecting it to increase US interest rates for the first time since December last year.

While the broad market traded in the red, London-listed oil-related stocks found support in a rise in crude prices, after the Organization of Petroleum Exporting Countries confirmed it will reduce oil supply by 1.2 million barrels a day to 32.5 million barrels day effective from January 2017. In September, OPEC planned on limiting total production to between 32.5 million and 33.0 million barrels per day.

The rally in oil prices appeared to lose some strength at midday, but instead regained strength in the London afternoon, with Brent trading at USD54.09 a barrel at the London close. The North Sea Benchmark extended its Wednesday's gains, when it stood at USD50.84 a barrel at the close.

Analysts at IG said there remain "a number of hurdles to curing the oversupply evident", as Russia and other non-OPEC producers are not due to meet until December 9 to negotiate if countries outside the cartel join it in its supply cut.

OPEC expects this countries to reduce their output by another 600,000 barres per day, including the commitment from Russia to slash 300,000 barrels from its own daily production, while Azerbaijan and Kazakhstan have said they might also cut output.

BP rose 2.3%, also benefiting from an upgrade to Outperform from Neutral by Credit Suisse. Royal Dutch Shell 'A' shares ended up 1.7% and 'B' shares closed 2.2%. FTSE 250-listed oil services firms Hunting and Amec Foster Wheeler rose 7.5% and 4.5%, respectively.

Elsewhere on the London Stock Exchange, Dixons Carphone ended up 0.9% after the electronics retailer was initiated at Outperform by Credit Suisse.

Legal & General Group closed 2.4% higher. The life insurer and pension fund manager was upgraded to Overweight from Equal Weight by Barclays. "We upgrade Legal & General to Overweight as we believe the risk of a UK recession has faded while the Solvency II capital requirements of writing bulk annuities is much more efficient than expected," the bank said.

Royal Bank of Scotland Group ended up 1.7%, recovering some of the losses seen on Wednesday after the lender emerged as the weakest of the UK's major banks in the results of the Bank of England's stress tests.

On the flipside, gold miners Fresnillo, down 2.7%, and Randgold Resources, down 1.4%, were tracking the precious metal price lower, quoted at USD1,169.88 an ounce compared to USD1,172.00 at the London equities close on Wednesday. Mid-cap peer Hochschild Mining fell 2.2%.

FTSE 250 Euromoney Institutional Investor rose 10%, after Peel Hunt upgraded the business information company to Buy from Hold, according to traders.

Wizz Air Holdings rose 4.6% after the Eastern Europe-focused budget carrier was upgraded to Buy from Neutral by Goldman Sachs.

Media and events company Ascential fell 4.1% to 265.04p. Shareholders sold down their stake in the company for a total of GBP171.6 million. Three vehicles controlled by private equity firm Apax, together with Guardian Media Group, sold a total of 66.0 million shares in the company at 260.00 pence per share.

In the UK corporate calendar Friday, Berkeley Group Holdings release half-year results while Urban&Civic publish full-year results.

In the economic calendar, the UK construction PMI is at 0930 GMT, the eurozone producer price index is at 1000 GMT. In the US, alongside nonfarm payrolls, the Baker Hughes US Oil Rig Count data are at 1800 GMT.

By Daniel Ruiz; danielruiz@alliancenews.com

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