U.K. stocks advanced on Friday, set to break a two-day losing streak, as the pound selloff resumed on signs Brexit discussions between Brussels and London are close to a painful breakdown.
Traders reacted little to data confirming the U.K. economy expanded at its slowest pace in five years in the first quarter.
What are markets doing?
The FTSE 100 index UKX, +0.26%[1] gained 0.3% to 7,739.78, trimming its weekly loss to 0.4%. The London benchmark has moved sharply lower over the last two days on increasing concerns about trade talks between the U.S. and China, and on worries over President Donald Trump’s decision to pull out of a historic summit[2] with North Korea.
The pound GBPUSD, -0.1869%[3] fell to $1.3355, from $1.3379 late Thursday in New York. Sterling touched a fresh 2018 low earlier this week wound $1.3305.
What is driving the market?
The fall in sterling provided a lift to the FTSE 100 on Friday. A weaker pound tends to boost the FTSE 100, as the index’s components conduct the bulk of their business overseas and a softening in sterling lifts revenue when converted back into the U.K. currency.
Sterling was hit by concerns over the Brexit negotiations after European Union officials said the British government was “chasing a fantasy” in the talks, according to the Guardian newspaper. The comment came after a tense week of discussions, with the two sides fighting over the future security relationship. Fears are the lack of agreement could lead to a complete breakdown in negotiations.
Headline of the day... pic.twitter.com/7mpPA9xAv1[4]
— Ryan Sabey (@ryansabey)
Bank of England Governor Mark Carney warned in a speech late Thursday[6] that a “disorderly” Brexit could trigger another interest rate cut to support the British economy.
Carney will speak again on Friday at the Swedish Riksbank Anniversary Conference in Stockholm at 2:20 p.m. London time, or 9:20 a.m. Eastern Time.
Meanwhile, calm appeared to be returning to the market after a week of geopolitical ups and downs, as North Korea made a restrained response to Trump’s withdrawal from a planned June meeting with Kim Jong Un. A senior foreign ministry official said North Korea was still willing to meet[7] and “sit down face-to-face with the U.S. and resolve issues anytime and in any format.”
The session may see thin volumes as traders head out for a long weekend, as the market will close Monday for the late May bank holiday....