LONDON MARKETS: FTSE 100 Wobbles Into The Close As Pound Rallies On Brexit Progress

By Carla Mozee and Sara Sjolin, MarketWatch

London benchmark falls for the week

U.K. stocks significantly trimmed their gains and closed only marginally higher on Friday, weighed by a rise in the pound after a more positive tone came out of the EU summit in Brussels, seen as moving Brexit talks along.

What stocks are doing: The FTSE 100 index ended 0.19 point higher at 7,523.23, finishing the week 0.2% lower and breaking a four-week winning streak.

The London benchmark had opened in positive territory on Friday, boosted by a slide in pound against the dollar after the U.S. Senate narrowly approved a Republican budget resolution (http://www.marketwatch.com/story/senate-republicans-approve-budget-proposal-clearing-path-to-tax-overhaul-2017-10-19). The 51-49 vote paves the way for tax reforms that could lead to $1.5 trillion in U.S. tax cuts and is seen as dollar positive, analysts said.

Weakness in the pound can help pull up shares of multinational companies. It can provide a currency-related boost to earnings, once the companies translate their revenue into sterling.

Brexit talks: However, later in the day, sterling started to move higher after progress was made in Brexit talks between the U.K. and EU leaders.

Donald Tusk, president of the European Council, said European Union leaders have given the go-ahead to start internal discussions on the second phase of Brexit talks. However, that doesn't mean those talks on trade are ready to start, observers said.

(https://twitter.com/eucopresident/status/921308246127857664)

Meanwhile, U.K. Prime Minister Theresa May said line-by-line work will continue on reaching an amount for the U.K.'s exit bill that the EU says it must pay. EU leaders were wrapping up their summit in Brussels on Friday.

The pound traded at $1.3178 at the time of the European close, up from $1.3159 late Thursday in New York.

What strategists are saying: "A surge throughout the day for the pound has been prompted by a wave of signs that suggest a softening of the EU's stance on trade talks. Crucially, it is the lady herself, Angela Merkel, that has been keen to stress the progress being made," said Chris Beauchamp, chief market analyst at IG, in a note.

"This has been enough to tempt some sterling bulls out of their hiding places, after a week in which U.K. data has taken the shine off expectations for a BOE rate hike in November," he added.

Stock movers: InterContinental Hotels Group PLC (IHG) fell 0.9% after a financial update. The operator of the Crown Plaza and Holiday Inn chains said it is confident in its outlook for the rest of 2017 (http://www.marketwatch.com/story/intercontinental-hotels-backs-view-as-sales-rise-2017-10-20), as it reported an increase in room revenue.

Unilever PLC (ULVR.LN) (ULVR.LN) lost 3.2%, adding to a 5.5% loss on Thursday when the consumer-products giant reported a slowdown in revenue. For the week, Unilever shares dropped 7.6%, logging their worst week since February 2009.

Bank of England watch:BOE's Deputy Gov, Jon Cunliffe (https://www.bloomberg.com/news/articles/2017-10-19/boe-s-cunliffe-says-timing-of-rate-hike-is-an-open-question-j8yrzrb8) struck a cautious tone about the potential for a U.K. interest-rate hike next month in an interview with the BBC late Thursday. He said it was an "open question" when to begin slow and gradual increases.

Read:Brexit is far from the only worry for U.K. stocks (http://www.marketwatch.com/story/brexit-is-far-from-the-only-worry-for-uk-stocks-2017-10-14)

The stream of economic data this week has been closely watched for prompts for the BOE as it assess its next move on interest rates. The bank's monetary policy makers are largely expected to raise the benchmark rate from its record low of 0.25% at a meeting in November.

Retail sales fell 0.8% in September (http://www.marketwatch.com/story/uk-retail-sales-disappoint-with-drop-of-08-2017-10-19) from the previous month, inflation-adjusted pay fell for the sixth time in a row (http://www.marketwatch.com/story/uk-real-wages-fall-for-6th-month-in-a-row-2017-10-18) in August, and consumer price inflation hit 3% (http://www.marketwatch.com/story/uk-inflation-hits-3-highest-rate-since-2012-2017-10-17), a percentage point above the BOE target.

(END) Dow Jones Newswires

October 20, 2017 12:11 ET (16:11 GMT)

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