LONDON MARKETS: FTSE 100 Scores Biggest Win In 10 Days As Pound Slides After Brexit Breakthrough

By Carla Mozee and Sara Sjolin, MarketWatch

Home builder Berkeley rallies after update; miners gain on upbeat China data

U.K. stocks went from being Europe's underperformer to the region's outperformer on Friday, after the pound slumped in afternoon trade as the initial euphoria over a Brexit breakthrough faded.

Banks rallied after a long-awaited post-financial crisis deal on Basel III standards was agreed on Thursday.

How markets are moving: The FTSE 100 index ended the day 1% higher at 7,393.96 after opening in negative territory. That marked the benchmarks biggest one-day percentage gain since Nov. 28. For the week, the blue-chip index rose 1.3%, partly rebounding from a 1.5% fall from last week.

The pound tumbled to $1.3368 at the time of the London market close after hitting an intraday high of $1.3521. That compares with $1.3475 late Thursday in New York. Sterling also erased its gain against the euro, fetching EUR1.1365, compared with EUR1.1445 on Thursday.

The 10-year gilt yield rose 3 basis points to 1.278%, according to Tradeweb. Yields rise when prices fall.

What's moving markets: Jean-Claude Juncker, the president of the European Commission, said early Friday that "sufficient progress" has been made (http://www.marketwatch.com/story/breakthrough-on-brexit-terms-opens-way-to-next-phase-of-talks-2017-12-08) on three key issues holding up the Brexit negotiations for the talks to advance to the next stage.

"I believe we have now made the breakthrough we needed," Juncker said at a press conference in Brussels.

The announcement comes after a night of intense negotiating for British Prime Minister Theresa May, who managed to resolve the final issue -- the Irish border -- needed to satisfy the EU side.

The Brussels negotiating team is now recommending that EU leaders give the go-ahead for the next stage when they meet Dec. 14-15.

A move to the second stage of talks would reduce the chances of the U.K. exiting the bloc without a deal. An EU official, however, reportedly threw cold water on hopes of a quick agreement on trade, saying it's not realistic to expect an agreement by March 2019, when the U.K. leaves the union.

The developments on Friday were overall read as positive, but a lot of the good news had already been priced in for the pound, leading to the afternoon losses, according to analysts. The FTSE 100 usually gains on pound weakness, as roughly 75% of revenue for companies listed on the London index is generated overseas.

"I think we've seen a classic case of the rumor being bought and the fact sold, with sterling having rallied early last week in anticipation of a deal being close then again on Thursday," said Craig Erlam, senior market analyst at Oanda, in a note.

"We could see more upside in the pound in the coming months but as it was before, the road ahead is bumpy and that will be reflected in the currency markets. The pound will remain vulnerable to any suggestion that a deal may not be reached in time," he added.

Bank shares bulk up: Barclays PLC (BCS) (BCS) picked up 2.5%, and Lloyds Banking Group PLC (LLOY.LN)(LLOY.LN) jumped 3.6%. Royal Bank of Scotland Group PLC (RBS.LN) (RBS.LN) added 2.1%.

London-listed bank stocks were higher on the Brexit progress, as Friday's breakthrough brightens the prospects the U.K. will maintain strong trade ties with the EU once it has withdrawn. As well, bank shares rallied after a long-awaited agreement on banking rules by global finance officials highlighted that most lenders hold a sufficient amount of capital.

The post-financial crisis agreement on Basel III standards for banks that was struck late Thursday will allow 10 years for a small number of lenders to raise capital or reduce risk.

House builders higher: Berkeley Group Holdings PLC shares (BKG.LN) rose 6.9% after the home builder raised its five-year profit forecast (http://www.marketwatch.com/story/berkeley-pretax-profit-rises-36-lifts-guidance-2017-12-08)and said half-year pretax earnings rose 36% on higher revenue. Brexit uncertainty is among the factors weighing on the housing market but those have been partially offset by low interest-rate financing and favorable currency movements, said Berkeley.

Other movers: Shares of miners were mostly higher after fresh data showed Chinese exports and imports grew in October (http://www.marketwatch.com/story/chinas-exports-rise-for-9th-month-in-a-row-2017-12-08). Chinese companies are key buyers of industrial and precious metals.

Miner Fresnillo PLC (FRES.LN) put on 2.1%, Glencore PLC (GLEN.LN) climbed 2.2% and BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) put on 1%.

International Consolidated Airlines Group SA (IAG.LN) (IAG.LN) rose 2.1% as the company said its British Airways unit will launch a new U.K. flexible-benefits pension scheme (http://www.marketwatch.com/story/iag-to-end-british-airways-defined-pension-scheme-2017-12-08) and close its main defined benefit scheme in a move to address costs.

Economic data:British factory output grew 0.1% in October compared with September (http://www.marketwatch.com/story/uk-manufacturing-grows-for-6th-month-in-a-row-2017-12-08), and by 3.9% compared with the year-ago period, the Office for National Statistics said. (http://www.marketwatch.com/story/uk-manufacturing-grows-for-6th-month-in-a-row-2017-12-08)Those figures were slightly above expectations from a Wall Street Journal survey of analysts. Manufacturing accounts for roughly a fifth of the U.K.'s economy, which is largely driven by the services sector.

Industrial output was flat in October, but annual growth of 3.6% was slightly above consensus.

(END) Dow Jones Newswires

December 08, 2017 13:12 ET (18:12 GMT)

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