London close: Stocks, pound climb in tandem on Brexit optimism

London stocks managed to carve out small gains, with the top-flight index hitting a record intraday high, even as pound jumped to its best level since the referendum after it was reported that Spain and Holland would back a soft Brexit deal.

The FTSE 100 was up by 0.20% or 15.70 points at 7,778.64 by the close of trading, having hit a record intraday high of 7,782.89 earlier, above Thursday's closing record of 7,762.94.

In parallel, the pound jumped 1.16% versus the greenback to 1.36924 and was 0.32% higher against the euro at 1.1289.

Meanwhile, the second-tier index added 0.59% or 121.43 points to 20,859.35.

Triggering the move in Sterling, Bloomberg reported that Spanish economy minister Luis de Guindos and his Dutch equivalent Wopke Hoekstra met throughout the week to discuss their Brexit positions as both nations became concerned about the potential impact from higher tariffs and the implications of any agreement for the EU budget.

"Though the Commission proclaims the indissoluble unity of the 27, it has become increasingly clear this week that there are cracks in the edifice. Various member states have made noises about seeking a sensible post-Brexit partnership with the UK, and it looks like Madrid and Amsterdam have broken cover to back a deal to minimise any disruption from the UK’s departure," said Chris Beauchamp at IG.

"Even with renewed sterling strength the FTSE 100 has been able to clamber to a new high. Bullishness is rampant among investors, who appear to be tripping over themselves in a race to buy US and UK equities."

Helping to boost sentiment as well, earlier in the session it was announced that German Chancellor Angela Merkel's conservative Christian Democratic Union bloc and the Social Democrats had agreed to a blueprint for formal coalition negotiations.

Stateside, the government reported that 'core' consumer prices riose by 0.3% month-on-month in December (consensus: 0.2%), helping to push two-year US government bond yields past the 2.0% mark for the first time since 2008.

Despite that, the US dollar index was weaker and just off its 52-week lows, as markets continued to fully price-in just two more interest rate hikes by the Federal Reserve in 2018, albeit with a decent chance of a third.

Acting as a backdrop, overnight the People's Bank of China reported a drop in new yuan loans in the country from 1.12trn in November to 584.4bn for December (consensus: 1.0trn).

On the UK corporate front, the share up-swell was led by GKN, which surged nearly 27% after the company said it has rejected a bid proposal from Melrose Industries and appointed Anne Stevens as chief executive, as it announced plans to separate its aerospace and automotive businesses. Melrose shares were up 5%.

Inhaler maker Vectura was in the black following press reports that GlaxoSmithKline is looking to make a bid for the company.

Smiths Group was on the front foot as it said the net impact of the new US tax legislation on the group would be "favourable over the medium term".

Bovis Homes edged up after saying it built a lower number of homes in 2017 but reporting much improvement in its balance sheet and in customer satisfaction after the controversy that saw its previous chief executive depart under a cloud last summer.

Discount retailer B&M European Value racked up healthy gains as it reported a strong quarter of growth in the pre-Christmas period, helped by 22 new store openings and keeping prices low in the UK and Germany.

Restaurant and pub chain owner Mitchells & Butlers was in the black after saying that trading through the core three week festive season was “strong”, with LFL sales growth of 3.9%.

In broker note action, Mondi and Superdry were boosted by upgrades from Investec and Stifel, respectively, while SSP was higher after an upgrade at JPMorgan.

Rotork benefited from an upgrade at HSBC, but TUI was hit by a downgrade to 'neutral' at JPMorgan.

Market Movers

FTSE 100 (UKX) 7,778.64 0.20%
FTSE 250 (MCX) 20,859.35 0.59%
techMARK (TASX) 3,545.00 0.65%

FTSE 100 - Risers

GKN (GKN) 420.00p 26.24%
Smiths Group (SMIN) 1,652.00p 5.39%
Marks & Spencer Group (MKS) 309.20p 2.66%
WPP (WPP) 1,354.50p 2.30%
Johnson Matthey (JMAT) 3,164.00p 2.00%
Royal Bank of Scotland Group (RBS) 302.40p 1.89%
Kingfisher (KGF) 347.05p 1.81%
Whitbread (WTB) 3,901.00p 1.69%
GlaxoSmithKline (GSK) 1,353.00p 1.68%
Sainsbury (J) (SBRY) 253.30p 1.65%

FTSE 100 - Fallers

NMC Health (NMC) 3,102.00p -1.96%
Shire Plc (SHP) 3,581.00p -1.82%
British American Tobacco (BATS) 4,968.00p -1.62%
Direct Line Insurance Group (DLG) 370.40p -1.41%
Severn Trent (SVT) 2,015.00p -1.03%
Admiral Group (ADM) 1,887.00p -0.87%
Barclays (BARC) 194.50p -0.82%
Diageo (DGE) 2,642.50p -0.73%
DCC (DCC) 7,695.00p -0.71%
Just Eat (JE.) 798.60p -0.67%

FTSE 250 - Risers

Melrose Industries (MRO) 227.50p 5.81%
SSP Group (SSPG) 663.00p 5.41%
B&M European Value Retail S.A. (DI) (BME) 417.00p 5.06%
Capita (CPI) 420.60p 4.99%
Inmarsat (ISAT) 527.60p 4.88%
Ocado Group (OCDO) 428.80p 4.59%
Dunelm Group (DNLM) 696.00p 3.73%
Pets at Home Group (PETS) 174.50p 3.68%
Saga (SAGA) 125.50p 3.47%
IMI (IMI) 1,443.00p 3.44%

FTSE 250 - Fallers

Card Factory (CARD) 215.00p -4.78%
Sanne Group (SNN) 752.00p -2.72%
Sirius Minerals (SXX) 23.30p -2.51%
Ferrexpo (FXPO) 306.50p -2.48%
BGEO Group (BGEO) 3,774.00p -2.43%
Entertainment One Limited (ETO) 313.80p -2.24%
Euromoney Institutional Investor (ERM) 1,228.00p -2.12%
Softcat (SCT) 519.00p -2.08%
Evraz (EVR) 375.00p -2.06%
Rank Group (RNK) 239.50p -2.04%