LONDON MARKETS: FTSE 100 Turns Higher, With Bank Stocks Aided By Brexit Breakthrough

By Carla Mozee, MarketWatch Features Dow Jones Newswires

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

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London-listed bank shares climbed Friday after the president of the European Commission said a breakthrough in the Brexit deadlock had been made, clearing the way for negotiations to move on to the next stage.

The benchmark FTSE 100 was overcoming early weakness as the pound backed off from session highs. Home builders rose after an upbeat update from Berkeley Group Holdings PLC, and mining shares were up after Chinese exports rose for the ninth straight month, blowing past forecasts.

How markets are moving: The FTSE 100 index was up 0.3% to 7,339.37, but it had dipped into negative territory. Financial and consumer services shares were among the sectors advancing, but oil and gas, industrial and consumer goods groups were in the red.

On Thursday, the benchmark fell 0.4% (http://www.marketwatch.com/story/ftse-100-heads-for-a-win-even-as-china-warning-drags-down-miners-2017-12-07). For the week, the blue-chip index was on course to rise 0.5%, after falling 1.5% last week.

The pound bought $1.3468 after hitting an intraday high of $1.3521. That compares with $1.3475 late Thursday in New York. Sterling was trading around its highest against the euro in six months, fetching EUR1.1475, more than EUR1.1445 on Thursday.

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The 10-year gilt yield rose 7 basis points to 1.323%, 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 in 2019.

The FTSE 100 had been hampered by pound strength, as roughly 75% of revenue for companies listed on the London index is generated overseas. But the pound had trouble sustaining gains even after data showed the U.K. manufacturing sector expanded in October.

What strategists are saying: "Today is a hugely significant step forward towards exiting the EU in 2019, and while both sides will be relieved at the progress, many more tough negotiations lie ahead. But we can't underestimate how important today is," said Craig Erlam, senior market analyst at Oanda.

But Erlam pointed out that sterling had backed away from stronger gains.

"We've seen a rally in the pound over the last couple of weeks on the expectation of a deal being agreed, so what we may be seeing is simply a case of buying the rumor and selling the fact," he said in a note.

Bank shares bulk up: Barclays PLC (BCS) (BCS) leapt 3.3%, and Lloyds Banking Group PLC (LLOY.LN)(LLOY.LN) jumped 3.7%. Royal Bank of Scotland Group PLC (RBS.LN) (RBS.LN) added 1.4%.

HSBC Holdings PLC (HSBA.LN) (HSBA.LN) was up 0.8% while Standard Chartered PLC (STAN.LN) picked up a more modest 0.2%.

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, European 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) shot up 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.

Shares of rival home builders rose as well. Barratt Developments PLC (BDEV.LN) was up 4.4%, Persimmon (PSN.LN) was up 2.6% and Taylor Wimpey PLC (TW.LN) added on 3.2%.

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 0.8% as did Glencore PLC (GLEN.LN) and BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) . But Antofagasta PLC (ANTO.LN) was down 0.2%.

International Consolidated Airlines Group SA (IAG.LN) rose 1.8% 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.

Later, investors will shift attention to the U.S., where the monthly jobs report is scheduled for release at 8.30 a.m. Eastern, or 1.30 p.m. London time.

Read:Jobs boom likely carried over into November (http://www.marketwatch.com/story/jobs-boom-likely-carried-over-into-november-2017-12-07)

(END) Dow Jones Newswires

December 08, 2017 06:31 ET (11:31 GMT)