London market bounces back on Brexit breakthrough
The FTSE 100 Index rose 73.21 points to 7393.96.
London’s top-flight index rebounded on Friday and sterling gave up its gains as Prime Minister Theresa May overcame a major barrier in the Brexit negotiations.
The FTSE 100 Index rallied back from falls in the previous session – surging 73.21 points to 7393.96 – as investors responded to the announcement that Britain will pay a “divorce bill” of up to £39 billion under the withdrawal package agreed with Brussels.
The breakthrough was hailed by the Prime Minister as “a hard-won agreement in all our interests”, with the European Commission clearing the way for negotiations on the EU’s future relationship with the UK.
Sterling was trading higher in the morning session, but was down 0.7% versus both the US dollar and the euro at 1.33 and 1.13 respectively when the London market closed.
Multi-nationals on London’s premier index tend to enjoy a boost when the pound suffers because they benefit from a more favourable currency translation on their overseas earnings.
The pound was also reacting to the latest slew of data from the Office for National Statistics (ONS), which revealed a mixed picture for the UK economy at the start of the fourth quarter.
Figures from the ONS showed construction output unexpectedly fell by 1.7% on the month, as the industry was dragged down by a 1.5% decline in new work.
In a contrast of fortunes, Britain’s buoyant manufacturing industry delivered another robust performance in October, expanding by 0.1% as the wider industrial production came in flat.
David Madden, analyst at CMC Markets, said: “The U-turn in the pound has pushed the FTSE 100 higher and it has now exceeded its eurozone equivalents.
“At the start of the session, sterling was gaining ground on the back of the announcement that the UK and the EU had made sufficient progress in the first phase talks, so it can now move on to the discussions about trade.
“The early positive momentum in sterling ran out of steam and then the pound turned negative – which propped up the FTSE 100.”
Across Europe, Germany’s Dax climbed 0.8% and the Cac 40 in France was 0.3% higher.
On the oil markets, Brent crude surged 2% to $63.46 as the demand for crude picked up in China.
In UK stocks, housebuilder Berkeley jumped to the top of the biggest risers after booking rising profits and upgrading its long-term forecast.
Shares closed up 267p to 4,113p, as the company posted a 36% rise in pre-tax profits to £533.3 million in the six months to October 31, while revenue grew 14% to £1.6 billion.
Berkeley sold 2,117 homes in the period, up marginally from last year but at a much higher average selling price of £719,000, compared with £655,000.
The group said its pre-tax profit guidance has now been upgraded to £3.3 billion from £3 billion.
Away from the top tier, Porvair also pushed higher after the filtration and environmental technologies group said it was on track to beat annual targets.
The firm was up 30p to 480p, as it revealed underlying revenues had climbed 11% for the year ending in November.
The biggest risers on the FTSE 100 were Berkeley Group up 267p at 4,113p, Scottish Mortgage Investment Trust up 16.3p at 444.9p, Hammerson up 18.5p to 526.5p, and Barratt Developments up 22p to 630p.
The biggest fallers were Intertek Group down 90p to 5,050p, Rolls-Royce Holdings down 5p to 838.5p, Informa down 4p to 734p, and Centrica down 0.7p to 144.1p.