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U.K. stocks erased an earlier loss and turned higher on Friday, tracking a rally across Europe and the U.S. as worries over an imminent military attack in Syria receded.
The London benchmark, however, underperformed its European counterparts, weighed by a stronger pound and a tumble in Sage Group PLC shares after a sales warning.
What are markets doing?
The FTSE 100 index rose 0.2% to 7,272.97, on track for a 1.2% weekly advance.
The pound rose to $1.4262 from $1.4227 late Thursday in New York. A stronger pound tends to weigh on the British blue-chip index as it can reduce profit made overseas by multinational companies when it’s converted back into sterling.
What is driving the market?
Traders were cautiously optimistic on Friday after U.S. Defense Secretary Jim Mattis struck a note of caution over the potential for a strike on Syria, hinting the U.S. and its allies would need to take care not to spark a broader conflict with the country’s two biggest backers, Iran and Russia. His comments came after U.S. President Donald Trump also toned down his rhetoric, suggesting in a tweet Thursday that a strike might not be as imminent as thought.
Moreover, Trump suggested the U.S. could rejoin the Trans-Pacific Partnership, which also helped ease the market jitters, analysts said.
The FTSE 100 underperformance was largely due to a 9.4% slide for Sage shares The accountancy software company cut its full-year forecast for revenue growth after a disappointing first half to fiscal 2018.
Shares of Rolls-Royce also weighed on the London index. They dropped 1.4% after the after aircraft engine maker said it needs to carry out additional inspections on some versions of its Trent 1000 engines, leading to higher costs than expected in 2018.
What are analysts saying?
“It would be naive in the extreme to suggest that the events of the last 24 hours means that the threat of an escalation of geopolitical factors has passed,” said Michael Hewson, chief market analyst at CMC Markets UK.
“But for now, while the background noise is driving the short-term direction as markets gyrate higher and lower, recent price action might suggest that we could look to head towards the upper end of the trading range in the coming days, particularly if U.S. earnings come in ahead of expectations, starting today with J.P. Morgan and Citigroup ” he added in a note.
Both J.P. Morgan and Citi beat profit estimates, helping lift U.S. stock futures.
Which other stocks are in focus?
London Stock Exchange Group PLC shares rose 0.3% after appointing Goldman Sachs-veteran David Schwimmer as its new CEO.
Micro Focus International PLC gained 3.3%, adding to a 7.6% climb from Thursday that came after reports hedge fund Elliott Management Corp. has build a stake in the U.K. software firm.
On the FTSE 250 shares of Hammerson PLC slid 11%. The move came after Klepierre SA said it no longer intends to make a takeover offer for the U.K. mall owner after its £5.04 billion ($7.17 billion) proposal was rejected.