U.K. stocks rose Monday, latching onto an upbeat lead from Wall Street as a climb in U.S. stock futures indicated that market could add to last week’s advance.
Gains for equities also came following reports that the U.K.’s opposition party will voice support for Britain staying in the European Union’s single market after the country’s planned exit from the bloc next year.
How markets are moving
The FTSE 100 index UKX, +0.35% rose 0.5% to 7,281.41. All sectors rose, led by the basic materials and consumer materials groups. On Friday, the index lost 0.1% and ended last week lower by 0.7%, the fifth losing week in six.
The pound GBPUSD, +0.6658% fetched $1.4032, up from $1.3969 late Friday in New York.
What’s driving markets
The FTSE 100 started Monday’s session in the green, in line with advances across Europe and Asia, after Friday’s rally on Wall Street that left the major U.S. benchmarks SPX, +1.60% DJIA, +1.39% COMP, +1.77% up by more than 1% each. Those gains came after the Federal Reserve’s semi-annual monetary report may have eased worries about the prospect of more aggressive policy action.
In turn, the dollar DXY, -0.46% has been pulling back, giving a lift to dollar-denominated metals prices such as gold GCJ8, +0.79% and copper HGK8, +0.45% and shares of metals producers listed on the FTSE 100.
Meanwhile, the pound rose back above $1.40 as Bank of England Deputy Gov. Dave Ramsden in a Sunday Times interview said a stronger pace of wage growth could warrant another rate increase by the central bank. Ramsden was one of two policy makers who voted against a rate hike in November, the first BOE rate increase in a decade.
Last week, Bank of England Chief Economist Andrew Haldane at Treasury committee meeting said it was very likely average that weekly earnings growth will raise to 3% during the first quarter.
Investors on Monday will watch for a speech by the head of the U.K.’s opposition Labour Party, with reports indicating Jeremy Corbyn will say his party supports Britain creating a bespoke deal with the EU that would give the U.K. full access to the EU’s single market.
Sterling late Friday rose after reports that the 11-member Brexit cabinet committee agreed on a proposal for post-Brexit trade with the EU that could establish a similar trade deal that Canada has with the bloc, but with better access to the EU’s single market.
A stronger pound sometimes weighs on the FTSE 100 as about 75% of the benchmark’s revenues are made overseas and therefore shrinks when translated back into sterling.
Stock movers
Associated British Foods PLC shares ABF, +2.34% rose 1.7% after the owner of fast-fashion retailer Primark said it expects to report sales growth at all of its divisions for the first half of fiscal 2018, apart from its sugar unit.
Among metals producers, Anglo American PLC AAL, +2.58% rose 1.9% and Randgold Resources PLC RRS, +2.19% was up 1.7%.
Decliners were led by a 1.8% fall in Standard Life Aberdeen PLC SLA, -2.39% .
What strategists are saying
• “Equity markets in the U.K. and Europe are off to a good start, following on from a late surge in the US on Friday and a positive start to the week in Asia. Inflation and U.S. monetary policy has been the catalyst for recent volatility and remains the centre of attention, with all eyes on [Fed Chairman] Jerome Powell’s economic testimony this week,” among other calendar items, said Rebecca O’Keeffe, head of investment at Interactive Investor, in a note.
• “Labour leader Jeremy Corbyn ... is expected to announce commitment to a non-tariff agreement with the EU that would likely see the U.K. remain in the EU customs union, and avoid a ‘hard’ Brexit, whilst maintaining a strong relationship with the single market. This marks a substantial softening in his party’s position and is sure to be at odds with what Prime Minister Theresa May will say on Friday,” wrote analysts at Accendo Markets.