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London open: Stocks fall as sterling boosted by Brexit hopes
London stocks fell in early trade on Friday as the pound was underpinned by hopes of a Brexit deal being struck, underperforming European markets, which were lifted by renewed optimism over Sino-US trade talks.
At 0840 BST, the FTSE 100 was down 0.5% at 7,151.64, while the pound was up 0.1% against the dollar at 1.2459, having rallied 2% on Thursday after British Prime Minister Boris Johnson and Irish Premier Leo Varadkar said in a joint statement that they saw a pathway to a possible Brexit deal.
Sterling was also 0.1% firmer versus, at 1.1312.
Spreadex analyst Connor Campbell said: “Some EU officials may not agree, but it was enough to light a fire underneath sterling.
“Cynics would say the currency should enjoy this optimism while it lasts; nevertheless, the tone has changed suddenly and significantly in sterling’s favour.”
The EU’s chief Brexit negotiator, Michel Barnier, is due to meet UK Brexit Secretary Stephen Barclay for talks later in the day.
Away from Brexit, trade talks between the US and China were in focus after US President Trump said on Thursday that discussions between the two nations were going “really well”. While the FTSE 100 was held back by sterling’s gains, European indices were all firmly in the green, with the benchmark Stoxx 600 index up 0.5% at 384.82.
Campbell said: “In terms of both Brexit and the US-China trade war there has been an abrupt shift in sentiment in the last 24 hours – even if the markets may be setting themselves up for a fall if past patterns are anything to go by.
“After yesterday’s surge, based on Trump’s tweet stating he unexpectedly would be meeting Vice Premier Liu He, the European markets continued to rise on Friday, receiving a top-up overnight as the President claimed talks were ‘going really well’.
“While we have been here many times before – Trump is a master market manipulator – it has instilled a renewed optimism regarding a deal that stands in stark contrast to the pessimism that opened the week.”
Elsewhere, oil prices rose following Iranian news reports that a state-owned oil tanker had been struck by two missiles in the Red Sea near Saudi Arabia. West Texas Intermediate was up 1.8% at $54.55 barrel and Brent crude was 2% higher at $60.31.
In equity markets, advertising giant WPP slumped after French rival Publicis cut its 2019 sales outlook, while Man Group was trading lower as it reported a 1% fall in third-quarter funds under management.
Entertainment One nudged down as it said underlying first-quarter core earnings fell due to higher costs and a softer performance at its family and brands division.
On the upside, housebuilders and banks rallied on Brexit optimism, with Persimmon, Barratt, Taylor Wimpey, Lloyds, RBS and Barclays all higher.
