London stocks outshone their European peers on Thursday, helped along by a strong performance from the banking sector and well-received updates from the likes of AstraZeneca and Burberry, as investors awaited the latest policy call from the Federal Reserve.
The FTSE 100 finished 23 points or 0.3% higher at 7,140.68, while the pound inched down against the dollar to 1.3115 and erased earlier losses against the euro to flatten off at 1.1487.
Brexit was in focus, as always, with Ireland's deputy prime minister Simon Coveney urging “caution” over any excitement that a Brexit deal could be struck in the next few days, which had been piqued by fresh reports of an imminent deal.
European Commission officials said a deal could be reached between the UK and EU in the coming days, Austrian newspaper Der Standard reported.
But, speaking at a conference, Coveney said: “Let me just say this in terms of commentary today, particularly in British media, I would urge caution that an imminent breakthrough is not necessarily to be taken for granted, not by a long shot.
“Repeatedly, people seem to make the same mistake over and over again assuming that if the British cabinet agrees something, well then that's it. Then, everything is agreed. This is a negotiation…I would urge caution that people don't get carried away on the back of rumour in the coming days.”
Meanwhile, with the US mid-term elections out of the way, investors were shifting their attention to the latest Federal Reserve policy announcement, which is due at 1900 GMT. No change is expected to interest rates.
Analyst Craig Erlam at Oanda said the Fed meeting was always the lesser of the two risks this week, but investors will be poring over the statement for any signs that recent market volatility has in any way softened plans for hikes this year and next.
“It was Jerome Powell that appeared to be the catalyst for the recent stock market sell-off when he suggested that interest rates were not close to neutral and could become restrictive, which got investors worried about the economic ramifications of such a move. The Fed may seek to clarify this in the statement today, although given the lack of a press conference I wonder whether they will instead hold off and see if the situation settles down on its own.
“It would make much more sense, given the recovery we've seen in the market, for the Fed to address the interest rate path in December when it is widely expected to raise again. This would give them the opportunity to clarify anything in the press conference that follows and lay out clear plans, alongside the dot plot, for the coming years. Instead today it may just emphasise the cautious and gradual approach to rate hikes.”
On the UK data front, the housing market was shown to be at its weakest in six years as the Royal Institution of Chartered Surveyors revealed its house price balance fell to -10 last month from -2 in September. Economists had expected an unchanged reading.
The drop was attributed mostly to London and the South East, as prices continuing to rise in other parts of the UK, with the strongest growth in Northern Ireland and Scotland.
RICS said the weaker trend in prices is being driven by the lack of demand from new buyers, which is in part a result of heightened political uncertainty, ongoing affordability pressures, a modest upward move in interest rates and a lack of fresh stock coming onto the market
Among blue chip shares, banks put in the strongest performance, with Lloyds, Barclays, RBS and Standard Chartered all making gains along with the wider European and US banking sector. This comes on the back of strong recent results, the US midterm result and ahead of the Fed announcement.
The Bank of England announced that on Friday it will team up with the finance ministry and the Financial Conduct Authority to test the financial sector's resilience to a major cyber incident in the UK.
In other company news, soft drinks bottler Coca-Cola HBC fizzed higher as third-quarter revenue rose 2.6% to £1.87bn, slightly ahead of analysts' expectations.
Drug colossus AstraZeneca was on the rise as its product sales returned to growth in the third quarter after nine quarters of product revenue declines. New cancer drugs in particular were beginning to make a noticeable impact on the top line, with more in the pipeline, but a fall in external revenues hit the bottom line for the quarter.
Analysts also weighed in on the pharmaceutical sector after the US midterms elections, suggesting that a split Congress is unlikely to make significant cuts to government healthcare programmes or reduce drug prices.
Elsewhere, generic drugmaker Hikma Pharmaceuticals surged as it lifted its full-year guidance after solid performances from its injectables and generics divisions.
Luxury fashion brand Burberry gained as it said the response to new creative head Riccardo Tisci's Kingdom collection has been “exceptional” as it posted a rise in interim like-for-like sales.
Sainsbury's ticked higher as it reported a 20% increase in said half-year underlying pre-tax profits to £302m and said it remains on track to deliver current market consensus for 2018/19 underlying pre-tax profit of £634m.
Challenger bank OneSavings advanced as it posted loan book growth of 16% for the first nine months of the year.
On the downside, Inmarsat slumped as it reported a significant third-quarter EBITDA beat but commentary around the maritime business was poor, with the company losing market share to competition in the core Fleet Broadband business.
Motoring and cycling specialist Halfords was also on the back foot as is posted an improvement in first-half sales but a sharp drop in profits.
Oil giant BP was a prominent faller among the energy sector as Brent crude fell more than 1% to $71.16 a barrel.
“Talk of a potential production cut from OPEC and Russia has sparked a fresh bout of volatility in the Crude markets,” said Joshua Mahony, market analyst at IG. “Weekend sanctions on Iranian crude exports had raised expectations of a dearth of supply, driving prices up. However, the weakness we have seen since highlights the scepticism over whether we will actually see any form of drop in production given the Saudi pledge to make up for any lost output.”
On the broker note front, energy services provider Hunting was boosted by an upgrade to 'buy' at Canaccord Genuity, while security services firm G4S was higher despite a downgrade to 'sector perform' at RBC Capital Markets, having suffered heavy losses on Wednesday after its third-quarter update. Sophos climbed after Citi and Credit Suisse were among those weighing in with positive opinions a day after the shares were routed.
BP, Whitbread, Card Factory, Galliford Try, Go-Ahead Group, Greencoat UK Wind and Lancashire Holdings were among the companies whose stock went ex-dividend.
FTSE 100 (UKX) 7,137.89 0.29%
FTSE 250 (MCX) 19,219.08 0.38%
techMARK (TASX) 3,352.73 0.86%
FTSE 100 – Risers
Coca-Cola HBC AG (CDI) (CCH) 2,369.00p 4.82%
AstraZeneca (AZN) 6,114.00p 4.39%
Marks & Spencer Group (MKS) 311.05p 3.37%
Burberry Group (BRBY) 1,871.50p 3.06%
Micro Focus International (MCRO) 1,290.50p 2.79%
BT Group (BT.A) 256.00p 2.71%
Next (NXT) 5,472.00p 2.59%
Lloyds Banking Group (LLOY) 59.59p 2.30%
Associated British Foods (ABF) 2,623.00p 2.26%
Barclays (BARC) 179.16p 2.14%
FTSE 100 – Fallers
BP (BP.) 529.60p -2.70%
CRH (CRH) 2,267.00p -1.99%
Paddy Power Betfair (PPB) 6,695.00p -1.98%
WPP (WPP) 874.96p -1.71%
Johnson Matthey (JMAT) 2,991.00p -1.71%
Smurfit Kappa Group (SKG) 2,470.00p -1.67%
Smith (DS) (SMDS) 376.30p -1.62%
British American Tobacco (BATS) 3,371.50p -1.59%
Sage Group (SGE) 554.20p -1.53%
Reckitt Benckiser Group (RB.) 6,262.00p -1.42%
FTSE 250 – Risers
Sophos Group (SOPH) 355.75p 9.80%
Hikma Pharmaceuticals (HIK) 2,029.00p 5.81%
G4S (GFS) 185.60p 4.18%
OneSavings Bank (OSB) 391.60p 3.87%
Wetherspoon (J.D.) (JDW) 1,180.00p 3.69%
JD Sports Fashion (JD.) 428.20p 3.63%
Howden Joinery Group (HWDN) 487.50p 3.33%
Centamin (DI) (CEY) 97.70p 3.10%
CYBG (CYBG) 263.00p 2.98%
Thomas Cook Group (TCG) 53.05p 2.71%
FTSE 250 – Fallers
Inmarsat (ISAT) 422.60p -8.21%
Galliford Try (GFRD) 856.50p -4.89%
TalkTalk Telecom Group (TALK) 123.20p -4.12%
Go-Ahead Group (GOG) 1,537.00p -3.45%
Superdry (SDRY) 829.50p -3.15%
BBA Aviation (BBA) 241.20p -2.82%
Lancashire Holdings Limited (LRE) 595.50p -2.70%
Card Factory (CARD) 186.90p -2.61%
Halfords Group (HFD) 302.20p -2.52%
Mediclinic International (MDC) 370.80p -2.45%