FTSE 100 ends higher as investors ‘pin their hopes’ on Trump-Kim summit

U.K. stocks posted their best session in nearly two weeks Monday, buoyed as the pound pulled back in value, and as investors took on risk ahead of what’s set to be a historic meeting between U.S. President Donald Trump and North Korean leader Kim Jong Un.

How markets performed

The FTSE 100 index rose by 0.7% to close at 7,731.43, the strongest rise since May 30, according to FactSet data. All sectors finished higher, led by the consumer-goods group. On Friday, the index fell 0.3% and finished last week with a 0.3% decline.

The pound fell to $1.3380 from $1.3411 late Friday in New York. It also declined against the euro fetching €1.1350, versus €1.1394 in the prior session.

What drove markets

U.K. stocks opened higher with the broader European equity market where Italian stocks  rallied after the country’s new finance minister offered reassuring remarks about Italy’s commitment to the eurozone.

U.K.-listed blue chips then extended gains as the pound dropped following the release of data showing U.K. factory output fell by 1.1% in April, the biggest monthly decline since 2012.

The pound’s fall helped the FTSE 100, as sterling weakness can bolster revenue made overseas by multinational companies. Among so-called dollar-earners, British American Tobacco PLC  rose 2.5% and advertising behemoth WPP PLC  picked up 1.8%.

Stocks broadly moved higher even after the sour ending to the Group of Seven’s meeting in Quebec, Canada. Trump withdrew his support for the group’s communiqué after Canadian Prime Minister Justin Trudeau repeated his criticism of U.S. tariffs on Canadian metals.

Trump left the G-7 meeting early to fly to Asia. The first meeting between a sitting U.S. president and a North Korean leader is scheduled at 9 a.m. Singapore time, or 9 p.m. on Monday Eastern Time.

“It appears that investors are…pinning their hopes on Trump’s second big summit in the space of a week: a historic trip to Singapore to meet Kim Jong Un. Optimism, misplaced or otherwise, that the two countries could secure some kind of nuclear agreement led to a broadly positive Asian session, and helped the European indices to a strong start,” said Spreadex financial analyst Connor Campbell, in an note.

U.K. Prime Minister Theresa May attended the G-7 summit, as the U.K. is part of the G-7 with France, Germany, Italy, Japan, Canada and the U.S.

This week, there will be plenty of action from the monetary policy front. The U.S. Federal Reserve is widely expected to increase interest rates on Wednesday, and the European Central Bank expected to discuss when it will begin to end its bond-buying program at its meeting Thursday in Riga, Latvia.

What strategists are saying

A busy week for financial markets “has started quite badly for the GBP/USD,” after the poor manufacturing data, said Fawad Razaqzada, market analyst at Forex.com, in a note. The pound will face U.K. labor-market data on Tuesday, and the return of Prime Minister May’s Brexit legislation to the House of Commons “after receiving a battering in the upper House of Lords,” he said. Retail sales figures will follow on Thursday.

“At the moment, the cable remains stuck in a small range around the 1.34 handle and below key resistance in the 1.3460-1.3500 area,” Razaqzada added. “But the path of least resistance is still technically to the downside and will remain that way until and unless there’s a break in the market structure of lower lows and lower highs.”

Stock movers

Evraz PLC shares  soared 7.5% after a ratings upgrade to BB from BB- at Fitch Ratings, citing a “successful reduction” in the Russia steelmaker’s net debt to $4 billion ($3.5 billion).

Ocado PLC  shares, which are set to join the FTSE 100 this month, jumped 11.2% following a ratings upgrade by Goldman Sachs to buy from neutral. Ocado in May signed a deal to provide technology to U.S. grocery chain Kroger Co. a deal that analysts led by Rob Joyce called “transformational” for Ocado.

Inmarsat PLC shares  rallied 12.7% on the midcap FTSE 250 index That move extended a 19% leap in shares Friday before the British satellite telecommunications company late Friday said a takeover offer from EchoStar Corp.  “very significantly undervalued” its prospects and that its board rejected it.

“EchoStar’s approach to Inmarsat could point towards more discipline in the deployment of satellite operator capital and capacity, and upside for the sector,” said UBS analyst Michael Hill in a Monday note.