London close: Shares eke out small gains despite another big jump in the pound

London stocks managed to stay afloat even as the European Union's chief Brexit negotiator, Michel Barnier, held out the prospect of striking a deal with Westminster on Brexit in under two months' time, which sent the pound vaulting higher again.

Barnier's remarks lit a fuse under the pound, which climbed 0.83% against the dollar to 1.30232 and by 0.38% versus the euro to 1.1224, but the drag on shares from a stronger pound was offset by gains for banking stocks, with investors' spirits also lifted by the release of better-than-expected economic growth figures.

Thus, by the end of the trading day the FTSE 100 was up by 0.02% or 1.60 points to 7,279.30. In parallel, the second-tier index was ahead by 0.25% or 50.22 points at 20,259.83.

Speaking at the Bled Strategic Forum in Slovenia, Barnier said: "I think that if we are realistic, we are able to reach an agreement on the first stage of the negotiation, which is the Brexit treaty, within six or eight weeks."

In the background meanwhile, strategists at JP Morgan weighed in with a relatively upbeat view on global equities at the start of the week, including positive remarks on lenders' shares specifically.

"A number of sell-side pundits have in the last few days started to call for an imminent market selloff," Mislav Matejka and his team said in a research note sent to clients.

"We have last Monday argued that knee-jerk risk-off moves are likely in the very near term ahead of the implementation of $200bn worth of tariffs – see September Chartbook – but we remain of the view that one should use these falls to add into, and look for higher equities into year end."

Stocks had kicked the session off flat following a mostly downbeat session in Asia, after data revealed that China's surplus with the US hit a record high of $31.0bn in August, adding to worries about escalating trade tensions between the US and China.

On a related note, at the weekend some market observers had pointed out signs that US Democrats might come away with the control of the US House of Representatives at the mid-term elections, cautioning that it might make for a more combative line from the White House in multiple areas.

Nevertheless, Monday brought with it good news in the domestic economic arena, as data from the Office for National Statistics revealed that the UK economy grew faster than expected over the three months ending in July, with the hot weather and the World Cup providing a boost.

UK gross domestic product grew by 0.6%, up from 0.4% in the previous three-month period and beating expectations for a 0.5% rise. On the month, GDP grew 0.3%, up from 0.1% in June and beating expectations for a 0.2% increase.

Be that as it may, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Overall, July's data suggest that the risks to the MPC's forecast for another 0.4% quarter-on-quarter rise in GDP growth in Q3 lie to the upside. But the fall in the confidence components of the Markit/CIPS and Lloyds surveys, the slowdown in global manufacturing, and the prospect of a further escalation of political tensions in the UK suggest that the economy is heading for a weak end to 2018.

Meanwhile, industrial and manufacturing production both edged lower in three months to July, according to the ONS, both missing expectations.

Manufacturing production dropped 0.2% on the month compared to a 0.4% increase the month before and expectations for a 0.2% increase. Industrial output on the other hand was 0.1% higher on the month versus a 0.4% gain in June and expectations of a 0.2% rise.

Banks helped to underpin gains, with RBS, Barclays and Lloyds all in the green, tracking a solid performance from their European counterparts. Banks in Italy were particularly strong as the country's finance minister said yields would drop when the government lays out its budget for 2019.

Elsewhere, RPC Group surged as it confirmed that it was in "preliminary discussions" with two private equity groups over a potential offer for the plastics manufacturer. The FTSE 250 group, which has come under pressure from investors over its growth plans, said talks were taking place with both Apollo Global Management and Bain Capital.

Primark owner Associated British Foods was under pressure after it reiterated its outlook for the year as a strong performance from its retail arm and grocery, agriculture and ingredients business should more than offset the impact of lower EU sugar prices, but warned it would take a £20m hit from the stronger pound.

888 Holdings was in the red as it launched its online sports betting brand in New Jersey, while department store group Debenhams was sharply lower following reports that it has appointed advisers from KPMG to explore restructuring plans, including handing back excess store space to landlords or a company voluntary arrangement.

Sports Direct, which holds a near 30% stake in Debenhams, was little moved.

GlaxoSmithKline slipped as it said the US Food and Drug Administration said it needs more clinical data to support the approval of mepolizumab as an add-on treatment for exacerbations in patients with chronic obstructive pulmonary disease.

In broker note action, Morrisons was the biggest gainer after an upgrade to 'buy' at HSBC, while Rio Tinto was lifted to 'overweight' at JPMorgan but Glencore was cut to 'neutral' at JPM.

Bakkavor was upgraded to 'buy' at HSBC, Lonmin was boosted to 'hold' at Liberum and Standard Chartered was upgraded to 'buy' by Investec.

Market Movers

FTSE 100 (UKX) 7,279.30 0.02%
FTSE 250 (MCX) 20,259.83 0.25%
techMARK (TASX) 3,444.00 0.04%

FTSE 100 - Risers

London Stock Exchange Group (LSE) 4,729.00p 1.77%
Royal Bank of Scotland Group (RBS) 249.40p 1.76%
Morrison (Wm) Supermarkets (MRW) 266.15p 1.62%
Experian (EXPN) 1,920.00p 1.59%
Just Eat (JE.) 715.40p 1.56%
Centrica (CNA) 150.40p 1.55%
ITV (ITV) 160.75p 1.39%
Barclays (BARC) 177.08p 1.32%
Taylor Wimpey (TW.) 167.95p 1.30%
WPP (WPP) 1,181.00p 1.24%

FTSE 100 - Fallers

Melrose Industries (MRO) 216.30p -4.38%
Fresnillo (FRES) 813.00p -2.59%
Glencore (GLEN) 290.05p -1.76%
easyJet (EZJ) 1,419.00p -1.46%
Smurfit Kappa Group (SKG) 3,148.00p -1.32%
Pearson (PSON) 885.80p -1.16%
Evraz (EVR) 476.10p -1.08%
Randgold Resources Ltd. (RRS) 4,721.00p -1.01%
Whitbread (WTB) 4,664.00p -0.98%
GlaxoSmithKline (GSK) 1,510.20p -0.97%

FTSE 250 - Risers

RPC Group (RPC) 806.60p 17.99%
Alfa Financial Software Holdings (ALFA) 162.60p 6.00%
FirstGroup (FGP) 98.95p 4.38%
Ultra Electronics Holdings (ULE) 1,648.00p 3.97%
Games Workshop Group (GAW) 3,595.00p 3.45%
Indivior (INDV) 268.00p 3.31%
Entertainment One Limited (ETO) 384.00p 3.17%
IntegraFin Holding (IHP) 365.00p 2.82%
Convatec Group (CTEC) 230.90p 2.62%
Stobart Group Ltd. (STOB) 242.00p 2.54%

FTSE 250 - Fallers

Just Group (JUST) 74.20p -12.13%
IP Group (IPO) 124.40p -4.01%
JPMorgan Indian Investment Trust (JII) 672.00p -4.00%
Hochschild Mining (HOC) 156.20p -3.49%
Centamin (DI) (CEY) 87.60p -3.08%
Sirius Minerals (SXX) 25.60p -2.74%
Provident Financial (PFG) 648.60p -2.58%
Ascential (ASCL) 424.00p -2.44%
Baillie Gifford Japan Trust (BGFD) 835.00p -2.34%
Schroder Asia Pacific Fund (SDP) 421.00p -2.31%