U.K. stocks advanced on Thursday, rebounding from a four-week low as shares of heavyweights Diageo and Sky climbed after well-received earnings reports.
A continued rally in the pound, however, kept gains for the benchmark index in check.
What are markets doing?
rose to $1.4264, up from $1.4238 late Wednesday in New York and trading at its highest level since June 2016, when the U.K. voted to leave the European Union. Sterling has climbed as high as $1.4329 on Thursday.
What’s driving the market?
The FTSE is down 1% for the week so far, pressured by a rally in the pound. Sterling is up 2.9% against the dollar week-to-date and on track for its best week since September last year, partly due to a sliding dollar and partly because investors are growing more confident London and Brussels will agree on a Brexit transition deal in coming months.
The strong pound has weighed on the London blue-chip index as it cuts into earnings made by overseas companies, when they convert their profits back into the U.K. currency. About 75% of the FTSE’s revenue is generated outside Britain, so the index is particularly sensitive to sterling fluctuations.
Which stocks are in focus?
Individual stocks helped drive the FTSE higher on Thursday. Shares of Diageo PLC
rose 1.2% after the drinks company posted a 6.2% rise in pretax first-half profit and said the U.S. tax reform will reduce its overall tax rate.
put on 0.9% after the media giant posted a 28% rise in first-half pretax profit. The company is still waiting for a final decision from U.K. regulators over whether the bid by 21st Century Fox Inc.
to acquire full ownership of it can proceed.