London Markets: FTSE 100 steps higher, pound falls as Trump criticizes ‘soft Brexit’ plan

London Markets: FTSE 100 steps higher, pound falls as Trump criticizes ‘soft Brexit’ plan

U.K. stocks climbed Friday, on track to finish higher for the week, as the pound pulled back after U.S. President Donald Trump said the U.K.’s Brexit strategy may “kill” Britain’s chances of a trade deal with the world’s largest economy.

How markets are moving

The FTSE 100 index UKX, +0.33% rose 0.8% to 7,711.46, as all sectors gained ground. The index on Thursday rose 0.8%. For the week, the London benchmark was looking at a 1.2% advance, which would be the first win in three weeks.

The pound GBPUSD, -0.5604% fell to $1.3138 from $1.3206 late Tuesday in New York. Against the euro, the pound GBPEUR, -0.2386%  dropped to €1.1290 from €1.1316.

What’s driving the market?

Just a handful of stocks declined early Friday, with broad-based gains largely supported by the fall in the pound. Sterling weakness can bolster revenue made overseas by multinational companies, which are heavily weighted on the FTSE 100.

The pound fell after Trump, in an interview with The Sun newspaper published late Thursday, said U.K. Prime Minister Theresa May’s plan for a so-called soft Brexit would damage the likelihood of a trade deal between Britain and the U.S.

“If they do a deal like that, we would be dealing with the European Union instead of dealing with the U.K., so it will probably kill the deal,” said Trump, whose comments were published as May hosted a formal dinner for Trump on Thursday night.

May’s government on Thursday published a 120-page report that provided further details on the vision for the U.K.’s future relationship with the European Union, which was agreed at a Cabinet meeting last week. The strategy calls for frictionless trade in goods between the U.K. and the EU, prompting critics to say that wouldn’t amount to a clean break by the U.K. from the bloc.

On Friday, Trump is expected to hold a press conference. Recent action on stock markets has been swayed by concerns about a trade battle between the U.S. and China, so traders will likely listen out for any comments on the matter. In the early going, investors seemed to be putting aside trade-related fears, on signs the U.S. and China are willing to resume high-level talks.

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What strategists are saying

• The FTSE 100 is “back in the ballpark of Monday and Tuesday’s three-and-a-half week highs, showing the extent to which investors are trying to ignore the ongoing trade war between the U.S. and China unless they specifically have a new threat to deal with,” said Connor Campbell, financial analyst at Spreadex, in a note.

• “As advertised, the [Brexit] plan seeks frictionless access to the single market for goods, but not for services; it repeatedly highlighted service firms would probably have less access to the EU market than they do now. All in all, this plan is unlikely to be accepted by the EU in its current form, which implies that further negotiations (and potentially concessions) may lie ahead,” said Andreas Georgiou, investment analyst at XM.com, in a note.

Stock movers

DCC PLC DCC, +3.26%  rose 3.1% after the support-services group backed its outlook for fiscal 2019 and said it acquired two businesses for a combined value of £110 million ($145 million).

Diageo PLC DGE, +1.27%  was up 1.4% after a ratings upgrade at Goldman Sachs to buy from neutral of the liquor maker, whose brands include Johnnie Walker and Baileys.

Ashmore Group PLC shares ASHM, +2.74%  rose 2.8% even as the investment manager said its assets under management fell by $2.6 billion in the second quarter as net inflows were offset by an investment loss.

Micro Focus International PLC MCRO, +3.85%  topped the FTSE 100 by rising 5%. Among the index’s few decliners, Royal Bank of Scotland Group PLC RBS, +0.49%  fell 0.2%, as did oil major BP PLC BP., -0.75%

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