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FTSE 100 closes firmly higher as traders upbeat on US, China trade, possible Brexit deal

  • FTSE 100 closes over 60pts up; index is higher on week too

  • FTSE 250 surges as hopes of a Brexit solution rise

  • US markets up

5.20pm: FTSE 100 closes higher

FTSE 100 index closed higher on Friday as Wall Street shares also rose as traders were treated to burst of positive macro news on the US/China trade front and on Brexit.

The UK's blue-chip benchmark closed 60.72 points up at 7,247.08 on the day. On the week as a whole, it added nearly 1.3%.

Meanwhile, the more UK company focused FTSE 250 fared even better, surging 805.90 points up to close at 20,041.71, as optimism ramps up over a possible Brexit deal.

"In a nice change of pace, we heard positive mood music yesterday from the meeting between Prime Minister Johnson, and Irelands Leo Varadkar," said David Madden, market analyst at CMC Markets.

"The politicians said there is a pathway for an agreement being struck, but both sides have been guarded when it comes to the finer details."

Meanwhile, US-China trade talks have entered their second day and the negotiations are reportedly going well so far.

In the US, the latest consumer sentiment data was positive, which also added to the optimistic mood.

The Dow Jones Industrial Average added 390.54 points at 26,886, while the S&P 500 gained 42.49 points at 2,980.49.

3.05pm: US shares open higher

US markets have got off to a flyer ahead of the trade talks scheduled today between President Trump and Chinas vice premier, Liu He.

The Dow Jones was up 366 points (1.4%)at 26,863 and the S&P 500 was up 41 points (1.4%) at 2,979.

In London, the FTSE 100 has come off the top but is still sporting a 36 point gain (0.5%) at 7,223.

Thats despite a stonking performance by sterling on the foreign exchange markets on hopes that a way out of the Brexit jungle has been sighted by Boris Johnson and Irish Taoiseach Leo Varadkar.

“After continued combative comment from Brussels earlier in the week, the complexities around the workability of the Ireland scenario took a major step in the right direction yesterday. Sterling was immediately bid up on this news, and as it was reported the Barclay/Barnier meeting took a positive step, sterling gained to hit three-month highs,” said Harry Adams, the co-chief executive officer of Argentex Group, the recently listed provider of foreign exchange services.

“If this breakout gets traction and rhetoric continues to be positive we could easily see a very aggressive rally through major levels at 1.33. Any potential deal that looks palatable with parliament would push sterling to 1.40 and beyond,” he added.

Banks are among the main beneficiaries of this Brexit euphoria.

“Banks with the biggest exposure to the domestic markets are soaring,” reported Neil Wilson at markets.com.

Taxpayer-owned Royal Bank of Scotland Group PLC (LON:RBS) was the top performer, surging 16% to 226.3p.

“On the other side of the equation, big dollar earners like Shell, Diageo and Imperial Brands are all feeling the heat from the stronger pound today,” Wilson added.

The FTSE 250 has racked up an eye-catching 608 point (3.2%) gain at 19,843.

CYBG PLC (LON:CYBG), the owner of the Clydesdale Bank and Yorkshire Bank brands, was the top performer on the mid-cap index, with a 14% gain at 127.3p.

1.10pm: FTSE 250 puts its bigger brother in the shade

Today seems like a good day to focus on the mid-cap FTSE 250 as it is putting the FTSE 100 in the shade.

Buoyed by hopes that an 11th-hour deal might be within grasp ahead of the Brexit deadline at the end of this month, the FTSE 250 has stormed higher, rising 555 points (2.9%) to 19,790, after rising above 19,900 at one point.

Its bigger brother, the FTSE 100, has almost made progress but is up just 54 points (0.8%) at 7,240.

The FTSE 100s rise has been on the back of banks and housebuilders, all of which are inward focusing – there not being much of an export market for semi-detached houses.

“The FTSE 250, which is compiled of mainly domestically focused stocks is soaring up 2.5% [at the time of writing] from the open. The likes of Marks and Spencer, Galliford Try and Grafton Group have gains into double digits, to name a few,” reported Fiona Cincotta at City Index.

“The stocks on the FTSE 250 are very exposed to the UK economy and UK consumer sentiment. They took a big hit following the Brexit referendum and have experienced a challenging trading environment since as Brexit uncertainty has dragged on consumer confidence. A no-deal Brexit could have inflicted significant further damage on these stocks. The prospect of a no-deal Brexit being avoided is like Christmas has come earlier and this optimism is being reflected in the soaring prices.

“These will be some of the stocks to continue watching; stocks that could well push higher on increased Brexit optimism, or slip lower should fear of a no-deal return,” she added.

OneSavings Bank PLC (LON:OSB), up 12.7%, is the joint top performer among FTSE 250 constituents, while Galliford Try PLC (LON:GFRD), up 11%, was the best performing mid-cap housebuilding stock.

Barclays emerged today as a major stakeholder in OneSavings with a 7.3% stake.

Piping, underfloor heating and ventilation specialist Polypipe PLC (LON:PLP) may not be a housebuilder but it is a fellow traveller and like OneSavings, it too is up 12.7%.

Builders merchants such as Travis Perkins PLC (LON:TPK) and Grafton Group PLC (LON:GFTU) are also hitched to the housebuilding bandwagon; both are up a little more than 10%.

Theres even some love for retailers such as fallen Footsie giant Marks and Spencer Group PLC (LON:MKS), up 11%, and “sorry to hear the high street appears to be in terminal decline” condolence cards flogger Card Factory PLC (LON:CARD), up 8.5%.

12.10pm: The Footsie makes progress despite a strong rally by sterling

Sterling is off the canvas and ready to go another round with the dollar, despite which, the Footsie is in positive territory.

Londons index of heavyweight shares – which normally regards a strong exchange rate like Superman views kryptonite – was up 9 points (0.1%) at 7,232, reversing an earlier loss.

On the foreign exchange markets, the pound was up 1.21 cents at US$1.2565, so it is time to think about nipping over to the USA to celebrate Halloween (somewhere like Salem, perhaps) at the end of the month and simultaneously avoid the hoo-ha in the UK when the Brexit deadline passes.

“European markets are trading in the green as we look to close out the week in a positive fashion. With Trump expected to meet the Chinese Vice Premier today, there is a growing sense of optimism over a potential deal that could at least de-escalate the situation by delaying or postponing currently planned tariffs. Suggestions of a currency pact point towards a short-term solution that could appease Trump for now, buying room for both sides to continue negotiating without the threat of the December tariffs hanging over talks,” reported Joshua Mahony at IG.

“The pound has enjoyed an almighty rise off the back of yesterdays positive statement from Irish Taoiseach Leo Varadkar who points towards a potential pathway to success in talks between the two sides. Rumours of a new treaty to avoid Brexiteer fears of being trapped in the Irish backstop help raise hopes of an eventual deal that could pass in parliament.

“Todays headlines are likely to be dominated by the outcome from a meeting between Barnier, Barclay and Tim Barrow, as the sides seek to ascertain a pathway to avoid a no-deal Brexit. Meanwhile, with the pound driving higher off the back of an optimistic tweet from Tusk, it is clear that GBP traders will find plenty of volatility given the raft of statements coming out from both sides,” Mahony added.

The UK has still not come forward with a workable, realistic proposal. But I have received promising signals from Taoiseach @LeoVaradkar that a deal is possible. Even the slightest chance must be used. A no deal #Brexit will never be the choice of the EU.

— Donald Tusk (@eucopresident) October 11, 2019

I hate to be the thrower of cold water but when it comes to new UK proposals, whatever they might be, if PM moves towards EU position on customs, hes likely to lose most/all DUP +ERG support. New deal must be agreed not only by PM + EU but also by majority of MPs /1

— katya adler (@BBCkatyaadler) October 11, 2019

Looking at the FTSE 100 constituents, there is a very clear divide between the perceived losers from a stronger currency – companies with global brands, such as drinks giant Diageo plc (LON:DGE), fast-moving consumer goods makers Unilever PLC (LON:ULVR) and Reckitt Benckiser PLC (LON:RB.), fags makers British American Tobacco PLC (LON:BATS) and Imperial Brands PLC (LON:IMT) and drugs makers such as GlaxoSmithKline PLC (LON:GSK) and AstraZeneca PLC (LON:AZN) – and those seen as likely to benefit from a return of confidence in the UK should the Brexit mess be satisfactorily (relatively speaking) resolved.

Falling into the latter group are the banks and the housebuilders, which are notching up gains ranging up to 11.3% in the case of Royal Bank of Scotland Group PLC (LON:RBS).

In the losing group mentioned above, the losses are of the order of 2% or 3%.

READ: Lloyds and other banks surge on Brexit deal hopes

10.00am: Not much movement for Footsie but plenty going on beneath the surface

Londons leading shares are mixed with the weakness of big-dollar earners offset by gains for housebuilders and lenders.

The FTSE 100 was down 4 points (0.1%) at 7,183.

Fashion firm Burberry Group plc (LON:BRBY) was one of the big blue-chip fallers, sliding 3.8% to 1,970.5p after Hugo Boss put the frighteners on backers of shares in the luxury goods sector by issuing a profit warning.

Hugo Bosss business in North America has run into tough trading conditions while its operations in Hong Kong have taken a big knock from the political unrest in the city.

The update from Hugo Boss contrasts with yesterdays update from LVMH Moët Hennessy Louis Vuitton, which issued a set of third-quarter results that appeared to lay to rest bubbling concerns about the luxury goods sector.

In the mining sector, Rio Tinto plc (LON:RIO) was boosted by Jefferies upgrading the stock to buy from hold. The shares were up 0.6% to 4,128p.

On the other hand, sector peer Anglo American plc (LON:AAL), up 0.1% at 1,926p, seemed unfazed by the same broker cuttings its price target to 2,200p from 2,500p.

In a similar vein, hotels and restaurants group Whitbread plc (LON:WTB) shrugged off a downgrade to hold from buy by Deutsche Bank, rising 0.5% to 4,059p.

In a buoyant housebuilding sector, Barratt Developments PLC (LON:BDEV) and Bellway PLC (LON:BWY) were both endorsed by UBS, which initiated coverage on both with buy recommendations ahead of trading updates next week.

The price target of Barratt was set at 650p – the shares are currently up 3.7% at 608.6p – while the target for Bellway was pitched at 3,600p; Bellway shares are up 4.2% at 3,334p.

8.40am: FTSE off to a subdued start

Londons blue-chips opened slightly lower on balance, with the strength of sterling more than offsetting optimism relating to Sino-US trade talks.

The FTSE 100 was down 19 points (0.3%) at 7,167. On foreign exchange markets, the pound is up by around a tenth of a cent to US$1.2453.

“UK Prime Minister Boris Johnson and Irish premier Leo Varadkar said they have identified a pathway towards a Brexit deal. Following the news, GBPUSD breached the 1.245 mark for the first time since September 25 after seeing its biggest one-day jump in seven months, before moderating slightly to converge around its 100-day moving average,” reported Han Tan, a market analyst at FXTM.

“With three weeks remaining before the existing October 31 deadline, markets can expect more twists and turns in the Brexit saga, as has been the case since 2016. This uncertainty also means that the Pound will be highly volatile as the UK endeavours to find its way out of the European Union. The 1.20 level remains the floor supporting Sterling, unless a no-deal Brexit becomes an absolute certainty,” the analyst suggested.

While the Footsie is weighed down by sterling, the mid-cap FTSE 250 – an index populated by companies less reliant on a soft exchange rate – was up 107 points (0.6%) with potash project developer Sirius Minerals PLC (LON:SXX) leading the advance.

Outside of the FTSE 350, Dart Group PLC (LON:DART), the company behind the Jet2 travel brand, climbed 11% to 1,035p as it raised profit guidance for the current financial year. (Read more here: Dart cheers Thomas Cook collapse)

This is off the back of the collapse of Thomas Cook, which has also led TUI AG (LON:TUI) to add 2mln seats on its flights next summer, sending its shares 3.8% higher to 956.2p.

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