London close: Stocks higher despite pound strength amid optimism on UK politics

(Sharecast News) - London equity markets continued to push higher, even as investors pushed sterling to its best level since late July amid speculation that a deal between Westminster and Brussels could be in the works, with lenders' shares pacing gains as the UK government bond yield curve disinverted.
The FTSE 100 finished the session 0.31% higher at 7,367.46, while the pound traded at its best levels against the dollar and the euro since late July, up 1.16% against the American greenback to 1.24745 and by 1.02% versus the euro to 1.1263.

The yield on the benchmark 10-year Gilt meanwhile popped higher by nine basis points to 0.76% as investors around the world grew a tad less concerned about the outlook thanks to central bank largesse and more positive news on the US-China trade front - although many analysts and traders remained cautious.

Sterling continued to rise even as the Democratic Unionist Party dismissed an earlier report suggesting that it had softened its stance on a Northern Ireland-only backstop. The Times had reported that the DUP was prepared to abide by some European rules after Brexit, saying the party had agreed to "shift its red lines" as part of a deal to replace the backstop.

And in any case, according to some political commentators, Prime Minister Boris Johnson's meeting with European Union commission chief, Jean Claude Juncker, on Monday, could be an indication that a deal was possible.

Against that backdrop, on Friday, Credit Suisse strategists took their recommendation on UK stocks to 'overweight' (in USD terms), telling clients that now was the time to begin moving selectively into UK stocks.

"We agree with our economists that the chances of a no deal Brexit are now much lower, while an early election looks very likely," Andrew Garthwaite and his team said in a research note sent to clients.

"We continue to believe the chances of a deal on the Irish backstop have been underestimated," they added.

On the international trade front meanwhile, China's official Xinhua News Agency reported that China's State Council plans to exclude some agricultural products, such as soybeans and pork, from additional tariffs on US goods.

Nonetheless, Neil Wilson, chief market analyst at Markets.com said that messages on trade were mixed and investors should "try to ignore the noise" as a deal is a long way off.

"Trump says he would consider an interim deal - maybe, maybe not, you just don't know what's truth amid all the fake news," Wilson said.

Analysts at Citi agreed, telling clients there was "no chance" of a US-China trade deal on this side of teh 2020 US presidential elections.

In equity markets, companies with international exposure such as Experian, British American Tobacco and Unilever were knocked lower by the pound's strength.

Spirits company Diageo was also weaker after Reuters reported on Thursday that unions were demanding a 5% pay rise for workers set to strike this month in Scotland.

JD Wetherspoon was flat after boss Tim Martin hit out at "elite Remainers", accusing them of ignoring "the bigger picture" and the benefits of Brexit, as the pub chain posted a 7.4% increase in full-year sales but a 4.5% drop in profit before tax and exceptional item.

On the upside, domestic stocks enjoyed solid gains, with banks RBS, Barclays and Lloyds all higher, while housebuilders Taylor Wimpey, Barratt and Persimmon also rose.

SSE was in the green after agreeing to sell its retail business to OVO Group for £500m, comprising £400m cash and £100m in loan notes.

Education publisher Pearson gained after an upgrade at UBS and Britvic fizzed higher after an upgrade to 'buy' at Jefferies.

Market Movers

FTSE 100 (UKX) 7,367.46 0.31%
FTSE 250 (MCX) 20,195.75 1.17%
techMARK (TASX) 3,844.08 0.23%

FTSE 100 - Risers

Barratt Developments (BDEV) 659.20p 5.64%
Royal Bank of Scotland Group (RBS) 208.80p 5.51%
Barclays (BARC) 156.62p 5.33%
Lloyds Banking Group (LLOY) 54.63p 5.18%
ITV (ITV) 126.30p 5.12%
Antofagasta (ANTO) 950.80p 5.07%
Taylor Wimpey (TW.) 164.30p 4.62%
NMC Health (NMC) 2,942.00p 4.47%
Persimmon (PSN) 2,105.00p 3.75%
London Stock Exchange Group (LSE) 7,514.00p 3.61%

FTSE 100 - Fallers

Coca-Cola HBC AG (CDI) (CCH) 2,598.00p -4.06%
British American Tobacco (BATS) 2,970.00p -3.35%
Diageo (DGE) 3,280.50p -2.99%
Fresnillo (FRES) 729.60p -2.64%
Reckitt Benckiser Group (RB.) 6,275.00p -2.32%
Experian (EXPN) 2,468.00p -2.26%
Relx plc (REL) 1,854.00p -2.14%
Compass Group (CPG) 1,969.00p -2.04%
Just Eat (JE.) 691.80p -2.01%
Unilever (ULVR) 4,906.00p -1.85%

FTSE 250 - Risers

Bovis Homes Group (BVS) 1,135.00p 8.10%
CYBG (CYBG) 131.50p 6.87%
Crest Nicholson Holdings (CRST) 395.80p 5.54%
Kaz Minerals (KAZ) 459.80p 5.22%
Hammerson (HMSO) 273.00p 5.08%
Sanne Group (SNN) 567.00p 5.00%
Redrow (RDW) 643.00p 4.89%
Travis Perkins (TPK) 1,400.00p 4.75%
Hays (HAS) 155.30p 4.72%
Bellway (BWY) 3,301.00p 4.59%

FTSE 250 - Fallers

Centamin (DI) (CEY) 121.40p -6.62%
Acacia Mining (ACA) 231.80p -4.21%
Polymetal International (POLY) 1,133.00p -3.37%
Riverstone Energy Limited (RSE) 687.00p -2.95%
SSP Group (SSPG) 660.00p -2.65%
Pets at Home Group (PETS) 233.60p -2.42%
Hochschild Mining (HOC) 204.40p -2.29%
Go-Ahead Group (GOG) 1,999.00p -1.72%
Computacenter (CCC) 1,293.00p -1.60%
NextEnergy Solar Fund Limited Red (NESF) 118.50p -1.25%