Stocks Mixed As Brexit Talks Progress Lifts Pound

Stocks in London ended mixed on Friday with consumer goods stocks underperforming, while the pound took back early losses after positive comments from UK Prime Minister Theresa May surrounding Brexit negotiations.

The FTSE 100 index closed up 0.19 points at 7,523.23, and ended the week down 0.2%.

The FTSE 250 ended up 0.1%, or 15.36 points higher, at 20,146.88, ending the week down 0.6%. The AIM All-Share closed down 0.2%, or 1.49 points, at 1,020.33, ending the week 1.1% lower.

The BATS UK 100 ended flat at 12,774.96, the BATS 250 closed marginally higher at 18,339.73, and the BATS Small Companies ended flat at 12,451.64.

"It's not been such a positive week for UK stocks," said CMC Markets chief market analyst Michael Hewson, who noted the FTSE 100 had struggled on the back of a string of profit warnings from high profile firms like Unilever and Reckitt Benckiser, "both finishing a poor week on a disappointing note".

Away from corporate news, the pound was lifted by signs of progress in Britain's negotiations with the EU, as Prime Minister Theresa May said she is "ambitious and positive" on the talks, although there is still "some way to go".

The prime minister was speaking after leaders of the remaining 27 EU member states gave the green light for preparations to begin for the second phase of Brexit talks, dealing with trade.

The move paves the way for the possible start of formal talks on the future EU and UK trade relationship in December. The European Council in Brussels decided insufficient progress had so far been made in divorce talks to move on to trade discussions now, as Britain had hoped.

However, Council President Donald Tusk said in a tweet, "Brexit conclusions adopted. Leaders green-light internal EU27 preparations for 2nd phase."

At a press conference after her participation in the summit concluded - and while the remaining 27 leaders continued their discussions - May said: "I am ambitious and positive for Britain's future and for these negotiations."

The pound rallied following May's comments, having hit an intraday low of USD1.3096 earlier in the session. Sterling was quoted at USD1.3182 at the London equities close, compared to USD1.3207 at the London equities close on Thursday.

"A surge throughout the day for the pound has been prompted by a wave of signs that suggest a softening of the EU's stance on trade talks. Crucially, it is the lady herself, Angela Merkel, that has been keen to stress the progress being made. This has been enough to tempt some sterling bulls out of their hiding places, after a week in which UK data has taken the shine off expectations for a BoE rate hike in November," said IG chief market analyst Chris Beauchamp.

In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt both ended up 0.1%.

The euro stood at USD1.1783 at the European equities close, against USD1.1846 the prior day ahead of a special Spanish government cabinet meeting on Saturday that could trigger process to take control of Catalonia's powers.

Back in London, fast moving consumer goods companies Unilever and Reckitt Benckiser were extending losses sustained this week, closing down 2.6% and 1.3% respectively.

Unilever, which is behind products like Dove soap, Persil detergent and Ben & Jerry's ice cream, had closed down 5.5% on Thursday after reporting a fall in revenue in the third quarter due to poor weather and natural disasters in Europe and the Americas.

Meanwhile, Reckitt, which makes Durex contraception products, Gavison antacids and Dettol cleaning products, on Wednesday cut its full-year sales outlook and announced plans to revamp its business into two divisions in order to obtain growth in challenging markets. Unilever and Reckitt Benckiser shares have fallen 7.3% and 7.1% lower respectively this week.

On Friday, US rival consumer goods firm Procter & Gamble reported an increase in profit for the first quarter financial year 2018 that grew 5% from last year, while quarterly net sales increased 1%. Adjusted earnings per share topped analysts' expectations and the group maintained its expectation for financial 2018.

Hotel operator InterContinental Hotels Group closed down 0.9%, after saying it remains confident in its outlook for the remainder of the year after good third quarter trading, with hotels signed into the pipeline at the fastest third quarter rate since 2008.

However, analysts highlighted "lacklustre" growth in IHG's key American market as a disappointment in a set of third quarter results that showed an overall growth in revenue per available room.

IHG said revenue per available room in the Americas increased by 1.1% in the nine months to September 30, in line with the 1.1% rise seen over the first half of 2017. However, within the Americas, US revenue per available room grew 0.7% in the first six months of 2017, but was up just 0.6% in the nine months to September 30.

Meanwhile, at the top of the FTSE 100, financial services stocks were among the risers, with Barclays closing up 1.4%, Royal Bank of Scotland Group ending 0.8% higher, and Lloyds Banking Group up 0.6%, ahead of their third quarter earnings releases next week.

"Optimism is high that all will post fairly decent numbers amidst speculation about an increase in the base rate which should will have helped with respect to their margins for the current quarter," CMC's Hewson noted.

Lloyds reports earnings on Wednesday, Barclays on Thursday, and RBS Friday.

In the FTSE 250 Acacia Mining was the worst performer, closing down 8.1% after the gold miner said it saw third quarter revenue and earnings fall sharply as it continued to feel the impact from a ban on concentrate exports in Tanzania. Revenue for the third quarter, which ended September 30, slipped to USD170.6 million compared to USD284.7 million the same period the year before.

The stock had closed up 16% on Thursday after Reuters reported that Acacia's majority shareholder Barrick Gold had agreed a deal with the Tanzanian government for a 16% stake in three gold mines operated by Acacia. Barrick reportedly agreed to pay Tanzania USD300.0 million as a show of good faith. Acacia said it still awaits further clarification on the proposed deal.

Acacia's blue-chip peers Fresnillo and Randgold Resources were also among the worst performers in the FTSE 100, closing down 3.6% and 1.3% respectively, following weakness in the price of the precious metal.

Gold was down, as the dollar strengthened, at USD1,281.87 an ounce against USD1,287.90 at the London equities close Thursday.

"It's not been a good week for gold prices, slipping back as speculation picks up about the prospect of US tax reform, as well as an improving US economy. While a December rate rise appears to be an almost done deal, speculation about the next Fed chief is also weighing on prices as investors weigh up what effect each candidate might have on US monetary policy," said CMC Markets chief market analyst Michael Hewson.

Stocks in New York were up at the London equities close. The DJIA was up 0.4%, the S&P 500 index up 0.3% and the Nasdaq Composite up 0.4%.

Industrial giant General Electric Co reported weak earnings in its third quarter, despite increased revenue. Adjusted earnings were sharply lower than market estimates, while the top line beat analyst expectations.

In addition, US Federal Reserve Chair Janet Yellen is due to give an address Saturday at 0030 BST on the theme of "Monetary Policy Since the Financial Crisis" at the NEC Herbert Stein Memorial Lecture and Annual Members Dinner in Washington DC.

Media reports have suggested that US President Donald Trump is leaning toward nominating Federal Reserve governor Jerome Powell to succeed Yellen as the central bank head. Yellen, whose term expires in February, was appointed by then Democratic President Barack Obama in 2014.

Brent oil was firm, quoted at USD57.51 a barrel at the equities close Friday from USD57.36 at the London equities close on Thursday.

The economic events calendar on Monday has house price index data from China at 0230 BST, Eurozone's current account at 0900 BST and the UK CBI industrial trends survey at 1100 BST. In addition, Japan will head to the polls on Sunday in a snap election, which was called by Prime Minister Shinzo Abe in September.

In a light UK corporate calendar on Monday, there are half year results from shipping broker Braemar Shipping Services and a trading statement from diamond miner Petra Diamonds.