London close: Shares surge on hopes for Brexit and US-China trade talks
London stocks surged at the end of the week, with banks and housebuilders up on Brexit hopes, although gains for the top flight index were capped by a jump in sterling to its best levels since mid-2019 - but analysts remained wary.
There was also positive news to be had on the US-China trade talk front.
"It is a long journey to the EU summit, and if details of the new plan start to leak we may find the various sides pouring cold water on it," said IG Chief Market Analyst Chris Beauchamp.
"Meanwhile in Washington the US and China are still looking to hammer out a deal too [...] Again, the risk of disappointment is high [...] a partial deal still leaves plenty of room for fallout further down the line, something that should give investors pause for thought."
Nonetheless, the FTSE 100 was 0.84% firmer at 7,247.08, even as the pound rose 1.9% against the US dollar at 1.2681 and by 1.66% higher versus the euro to 1.1488 as investors cheered positive comments from European Council President Donald Tusk which appeared to validate the more upbeat tone from Prime Ministers Boris Johnson and Leo Varadkar the day before.
The more domestically-focused FTSE 250 meanwhile rocketed higher, putting on 4.19% to trade at 20,041.71 which was just a shade below its year-to-date highs.
The combined news around Brexit and US-China trade talks was so positive that traders barely reacted to news of an attack against an Iranian oil tanker in the Red Sea, with front-dated Brent crude oil up by 1.65% to $60.09 a barrel on the ICE.
In a televised statement in Cyprus, Tusk said: "Unfortunately we are still in a situation in which the UK has not come forward with a workable, realistic proposal."
However, he also said he had received "promising signals that a deal is still possible" from Irish premier Leo Varadkar, who met with UK Prime Minister Boris Johnson on Thursday.
"Technical talks are taking place in Brussels as we speak. Of course there’s no guarantee of success and the time is practically up, but even the slightest chance must be used," Tusk said.
Banks and housebuilders were the standout gainers, with RBS, Lloyds, Barclays, Barratt Developments, Persimmon and Taylor Wimpey all sharply higher, while B&Q owner Kingfisher was sitting pretty at the top of the FTSE 100.
Regarding Sino-US trade talks, US President Trump said on Thursday that discussions between the two nations were going "really well" - although not all analysts were especially enthused by the prospects of at least a trade truce.
"Existing tariffs will remain in place, including the September tariff hike, which has yet to really affect the economy," said Capital Economics's Michael Pearce.
"More broadly, it is difficult to take that much comfort from the latest signs of progress given that we’ve had plenty of apparent truces in recent months end abruptly in a sudden further escalation in trade tensions. Indeed, the irony is not lost on us that the currency clause at the centre of this “deal” was part of a previous truce that was subsequently ditched."
"The key implications of a deal in the short-term would be removing the threat of additional tariffs," the economist said.
In individual stocks, advertising giant WPP slumped after French rival Publicis cut its 2019 sales outlook, while Burberry was under pressure after German luxury fashion brand Hugo Boss downgraded its 2019 earnings forecast.
Defensive issues were shunned, with the likes of Fresnillo, British American Tobacco and Diageo moving lower.
FTSE 100 - Risers
Lloyds Banking Group (LLOY) 59.13p 12.27%
Barratt Developments (BDEV) 654.40p 11.52%
Royal Bank of Scotland Group (RBS) 218.30p 11.46%
Persimmon (PSN) 2,287.00p 10.86%
Taylor Wimpey (TW.) 163.75p 10.83%
Auto Trader Group (AUTO) 539.60p 9.92%
TUI AG Reg Shs (DI) (TUI) 1,005.00p 9.31%
Kingfisher (KGF) 210.20p 9.02%
Next (NXT) 6,458.00p 8.50%
Berkeley Group Holdings (The) (BKG) 4,355.00p 8.50%
FTSE 100 - Fallers
Fresnillo (FRES) 630.80p -3.58%
British American Tobacco (BATS) 2,710.00p -3.56%
WPP (WPP) 931.00p -3.40%
Diageo (DGE) 3,210.00p -3.36%
Unilever (ULVR) 4,647.00p -2.77%
GlaxoSmithKline (GSK) 1,675.00p -2.16%
Burberry Group (BRBY) 2,004.00p -2.15%
AstraZeneca (AZN) 6,893.00p -1.93%
Relx plc (REL) 1,833.50p -1.74%
BP (BP.) 493.55p -1.68%
FTSE 250 - Risers
Rathbone Brothers (RAT) 2,470.00p 16.78%
Countryside Properties (CSP) 353.00p 14.24%
Bakkavor Group (BAKK) 132.00p 14.19%
CYBG (CYBG) 127.00p 13.95%
Go-Ahead Group (GOG) 2,188.00p 13.84%
Travis Perkins (TPK) 1,394.50p 13.51%
Grafton Group Units (GFTU) 820.00p 13.42%
OneSavings Bank (OSB) 375.20p 13.15%
Galliford Try (GFRD) 711.50p 13.03%
Crest Nicholson Holdings (CRST) 405.20p 11.69%
FTSE 250 - Fallers
Inmarsat (ISAT) 564.20p -3.16%
Man Group (EMG) 157.95p -2.59%
Pershing Square Holdings Ltd NPV (PSH) 1,502.00p -1.05%
Baillie Gifford Japan Trust (BGFD) 809.00p -0.86%
JPMorgan Indian Investment Trust (JII) 720.00p -0.83%
Fidelity China Special Situations (FCSS) 211.50p -0.47%
F&C Investment Trust (FCIT) 690.00p -0.43%
JPMorgan American Inv Trust (JAM) 466.50p -0.43%
Personal Assets Trust (PNL) 42,150.00p -0.35%
Ferrexpo (FXPO) 147.70p -0.34%