The U.K.’s main stock index struggled for gains Thursday, as banks got a boost from reports of a potential Brexit-related breakthrough, but so did the pound, which worked against the FTSE 100’s exporters.
How markets are performing
The FTSE 100 UKX, +0.11% traded flat at 7,129.36, from Wednesday’s gain of 1.3%. For the month of October, the index fell 5.1%, its worst month performance since a 5.6% drop in June 2013.
The pound GBPUSD, +1.2141% shot to $1.2913 from $1.2767 late Wednesday.
What’s moving markets
Sterling’s gains came after the Times of London reported that government sources indicated a tentative deal had been reached to allow U.K. banks to keep operating in European Union markets even after Brexit goes through. Heavily-weighted banking stocks cheered the news, with Lloyds Banking Group PLC LLOY, +2.90% LYG, +0.00% RBS, +4.06% up 3%, Royal Bank of Scotland Group PLC RBS, +0.99% RBS, +4.06% climbing 4.5% and Barclays Group PLC BARC, +2.17% BCS, +1.27% up nearly 4%.
But the pound’s strength weighed on the index, given multinational companies generate most of their sales in other currencies.
The pound GBPUSD, +1.2141% had already received a boost Thursday, after a letter from Brexit Secretary Dominic Raab dated Oct. 24 was published that showed he expected to reach a deal with the EU by Nov. 21.
On the data front, the U.K. manufacturing purchasing managers index fell by 2.5 points between September and October to 51.1, the lowest reading since the period just after the Brexit vote, noted George Buckley, chief U.K. & euro- area economist at Nomura.
“In terms of the economic impact much will depend on how the more sizable service sector performs — PMI figures are due out on Monday,” he said, in a note.
Meanwhile, the Bank of England’s Monetary Policy Committee unanimously voted to leave key interest rates unchanged at its meeting on Thursday. The bank said the economic outlook will “depend significantly” on the terms of the U.K’.s exit from the EU, particularly “new trading arrangements, the smoothness of transition to them and the responses of households, businesses and financial markets.”
Stocks in focus
Away from banks, BT Group BT.A, +8.94% rallied over 10% after the telecommunications group delivered upbeat guidance. Just EAT PLC JE., +5.56% said third-quarter revenue rose 41% on robust orders and shares. Smith & Nephew PLC SN., +6.28% climbed 6.4% after the company delivered a revenue gain and lifted guidance.
— Anneken Tappe contributed to this report
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