(Alliance News) - Stocks in London ended in the green on Friday as investors rejoiced in Brexit and trade war progress, which has been the bane of financial markets and global economies.
The FTSE 100 index closed up 60.72 points, or 0.8% at 7,247.08, ending the week up 1.2%.
The FTSE 250 ended up a massive 805.99 points, or 4.2% at 20,041.71, ending the week up 2.9%, and the AIM All-Share closed up 13.00 points, or 1.5% at 869.28, ending the week 0.6%.
The Cboe UK 100 ended up 0.6% at 12,277.92, the Cboe UK 250 closed up 4.7% at 17,963.98, and the Cboe Small Companies ended up 1.3% at 10,944.04.
In Paris the CAC 40 ended 1.7% higher, while the DAX 30 in Frankfurt ended up 2.9%.
"Deals are in vogue on both sides of the Atlantic it seems, as the UK and EU attempt to build on yesterday's Varadkar/Johnson summit, and Trump prepares to meet the Chinese vice premier to hammer out an agreement," said IG Group's Chris Beauchamp.
"Despite indications that there is a) still a long way to go before any deal is passed, and b) that it might not be completed before 31st October and c) it still faces tough hurdles in Parliament, markets have enthusiastically engaged with the idea that the UK and the EU may yet hammer out some kind of deal that allows Brexit to take place and avoids a no deal scenario," Beauchamp added.
On the London Stock Exchange, domestic-focused stocks such as banks and housebuilders ended among the blue chip risers as investors cheered Brexit progress.
High street bank Lloyds Banking Group and state-backed lender Royal Bank of Scotland both closed up 12%.
In addition, housebuilders Persimmon, Taylor Wimpey, Barratt Developments, Berkeley Group closed up 11%, 11%, 12% and 8.5% respectively.
Analysts at FXPro told Alliance News: "Lloyds and RBS soared more than 10%, to highs from June and August, respectively. Shares of both companies bottomed in August after Boris Jonson came into power. Lower chances of exiting without a deal is good news for the financial sector. Banks breathed calmly as the possible deal reduces chances of shocks on the financial markets, and also allows them to rely on higher interest rates from the Bank of England, which is positive for their profit.
"The construction sector is also enjoying growth, remaining as sensitive as possible to news about the chances of an organized divorce from the EU."
At the other end of the large cap index, Mexican gold miner Fresnillo ended the worst performer, down 3.6% tracking spot gold prices lower.
Gold was quoted at USD1,476.20 an ounce at the London equities close, down from USD1,493.91 late Thursday, as the demand for the safe-haven asset waned.
"The surge in global stocks has encouraged traders to exit their gold positions, as there isn't much fear in the markets - gold usually outperforms when dealers are panicked," CMC Markets analyst David Madden noted.
Advertising firm WPP closed down 3.4% suffering a negative read-across from French peer Publicis.
Late on Thursday, Publicis guided for a fall in organic revenue growth in 2019 due to "very cautious" spending approaches by some clients.
Publicis shares closed down 15% in Paris.
The pound was quoted at USD1.2698 at the London equities close, up 3.2% from USD1.2306 at the close Thursday.
Sterling hit an intraday high of USD1.2706 versus the greenback in afternoon trade - its highest level since late June.
Brexit negotiations will now enter the "tunnel" phase of intensive and secretive talks in a major boost for UK Prime Minister Boris Johnson's hopes of securing a fresh deal.
The accelerated negotiations were agreed to by the EU27 after a "constructive meeting" between the European Union's chief negotiator, Michel Barnier, and Brexit Secretary Stephen Barclay in Brussels on Friday.
Johnson declined to say what concessions he made but said "under no circumstances" would he agree to a deal that damages the ability of all of the UK to "take full advantage" of Brexit.
The PM also cautioned that it is not yet a "done deal", adding: "There's a way to go. It's important now that our negotiators on both sides get into proper talks about how to sort this thing out."
European Council president Donald Tusk handed the PM a last-minute reprieve to secure an agreement, but warned that the UK still has not presented a "workable, realistic proposal".
On Thursday, Johnson held positive talks with his Irish counterpart Leo Varadkar to discuss ways of resolving the thorny Irish border issue, after London presented new proposals to replace the contentious backstop provisions in the current draft agreement.
"By bringing more than three years of uncertainty to an end and preventing a hard Brexit, a deal by the end of the month would be a big positive for the UK and a modest gain for EU27 economies," said Berenberg's Holger Schmieding
"UK real GDP would likely accelerate from the current sub-1% annualised rate to above 2%. The relief of an orderly Brexit would encourage firms to unleash pent-up investment and households to step-up discretionary spending. This would more than offset some scaling back of inventories built up to cushion potential hard Brexit disruptions," added Schmieding.
In addition, JPMorgan now estimates that there is a 50% chance a withdrawal agreement is reached with a "modified/time-limited"' Irish backstop.
The euro stood at USD1.1030 at the European equities close, up from USD1.1004 a day before.
On the economic front, German inflation reached 1.2% on the year in September, federal statistics office Destatis said, with consumer prices rising at their slowest rate since February 2018.
This followed an inflation rate of 1.4% in August compared with the same month a year earlier.
Against the yen, the dollar was trading at JPY108.51, up from JPY107.88 late Thursday.
Stocks in New York were sharply higher at the London equities close on optimism for progress in US-China negotiations, including a possible agreement to pause new tariff measures.
The DJIA was up 1.5%, the S&P 500 index up 1.6% and the Nasdaq Composite up 1.8%.
President Donald Trump said Chinese and US officials were working toward meaningful progress in trade talks, boosting hopes for a detente in the two sides' damaging trade war.
"Good things are happening at China Trade Talk Meeting. Warmer feelings than in recent past, more like the Old Days," Trump said on Twitter shortly after officials resumed negotiations for a second day.
Trump is due later Friday to meet with Beijing's top trade envoy Liu He in a sign the two sides expect to make a positive announcement.
Analysts at Capital Economics said: "Trade talks with China look set to conclude today with a 'mini deal', reducing the immediate risks of a further rise in tariffs. But existing tariffs will remain in place, including the September tariff hike, which has yet to really affect the economy. Accordingly, even though the yield curve un-inverted this morning on the news of a prospective deal, we still expect economic growth to slow in the coming months, prompting the Fed to cut rates in December.
"Moreover, we've been here before with temporary truces in the US-China trade war. This one may not hold much beyond a possible Trump-Xi head-to-head meeting at the APEC summit in mid-November."
Brent oil was quoted at USD60.30 a barrel at the equities close, up from USD58.75 at the close Thursday.
Oil prices surged after an Iranian tanker was hit by suspected missile strikes off the coast of Saudi Arabia, sparking fresh conflict fears one month after attacks on Saudi oil facilities that were blamed by Washington on Tehran.
The UK corporate calendar on Monday has a trading statement from emerging markets-focused asset manager Ashmore Group.
The economic events calendar on Monday has industrial production data from the eurozone at 1000 BST. Financial markets in Japan will be closed on Monday for the Health & Sports Day public Holiday.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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Lloyds (LLOY)
Berkeley Group (BKG)
Barratt Developments (BDEV)
Persimmon (PSN)
Fresnillo (FRES)
WPP (WPP)