LONDON MARKETS: FTSE 100 Slides To 2-month Low As Pound Rallies On Brexit Hopes

By Sara Sjolin, MarketWatch Features Dow Jones Newswires

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U.K. stocks underperformed the broader European markets on Thursday, put under pressure by another strong rally in the pound. Sterling was rising on further signs of a breakthrough in the Brexit negotiations.

What are markets are doing: The FTSE 100 index fell 0.4% to 7,359, building on a 0.9% loss from Wednesday and trading at around a two-month low. For November, the U.K. benchmark was on track for a 1.7% loss, which would be the biggest monthly drop since June.

Meanwhile, sterling jumped to $1.3524, up from $1.3410 late Wednesday in New York. The pound is now trading at its highest level (http://www.marketwatch.com/story/pound-rallies-on-brexit-hopes-as-dollar-looks-at-biggest-monthly-drop-since-july-2017-11-30) in more than two months. Strength in sterling tends to weigh on the FTSE, as around 75% of revenue for the index's components is generated outside the U.K.

What's driving the market: The pound's rally came after The Times newspaper said the U.K. is close to reaching an agreement over Northern Ireland (https://www.thetimes.co.uk/article/brexit-britain-close-to-irish-border-deal-pltcgrvcj) with the European Union's Brexit negotiators. The report said British officials earlier this week made a proposal to avoid a "hard border" between the U.K. province and the Republic of Ireland.

The EU has said it needs to see "sufficient progress" on the Irish border before the withdrawal talks can move on to deal with trade and a potential transition period. The two other issues are EU citizens' rights and the size of the U.K.'s exit bill.

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Earlier this week, media reports said London and Brussels had agreed on a Brexit "divorce" bill of around EUR50 billion, after U.K. Prime Minister Theresa May significantly raised the British offer.

This developments on the exit bill and the Irish border are seen as a breakthrough in the Brexit talks, which had reached a deadlock. That in turn sparked fears the U.K. would end up crashing out of the EU without a trade deal.

What strategists are saying: The Times said on Thursday the EU now is prepared to offer the U.K. a two-year transition period as early as January.

"This would be tremendously bullish for sterling," said Marshall Gittler, chief strategist at ACLS Global, in a note.

Stock movers: Shares of Mediclinic International PLC (MDC.LN) rose 3.6% after Jeffries upgraded the private hospital group to buy from underperform.

BAE Systems PLC (BA.LN) (BA.LN) shares were up 2.8% after the defense company said it does not expect new accounting standards (http://otp.investis.com/clients/uk/bae_systems2/rns/regulatory-story.aspx?cid=288&newsid=953981) to have a material impact on earnings.

But shares of home builder Persimmon PLC (PSN.LN) led the decliners with a drop of 2.6% after a Nationwide reading on U.K. home prices missed forecasts.

Shares of Greene King PLC (GNK.LN) dropped 2.6% after the pub operator said revenue and profit fell in the first half (http://www.marketwatch.com/story/greene-king-profit-rises-despite-fall-in-revenue-2017-11-30) of its financial year.

Off the FTSE 100, shares of Daily Mail and General Trust PLC (DMGT.LN) tanked 22% after the newspaper company said it swung to a pretax loss (http://www.marketwatch.com/story/daily-mail-swings-to-loss-on-impairment-charges-2017-11-30) in fiscal 2017.

Economic data: U.K. consumers turned more pessimistic about the country's economic situation and their own finances in November, a survey from GfK U.K (http://www.marketwatch.com/story/uk-shoppers-turn-more-gloomy-on-economy-gfk-2017-11-30). showed. Its consumer confidence index dropped by two points to stand at minus 1.

U.K. house prices were up (http://www.marketwatch.com/story/uk-house-prices-tick-up-but-miss-forecasts-2017-11-30) by a monthly 0.1% in November, Nationwide Building Society's data showed, compared with October's 0.2% growth and a forecast predicted gain of 0.2%. That was slightly below expectations and continued the recent trend of small gains.

(END) Dow Jones Newswires

November 30, 2017 10:48 ET (15:48 GMT)