By Barbara Kollmeyer, MarketWatch
London’s main stock index was headed for its best one-day gain since the summer after downbeat economic data weighed on the pound.
The FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX -5.25% jumped 1.4% to 20,495.91 in afternoon trading. If those gains hold, it would mark the biggest one-day percentage since a 1.8% gain in July. The index is headed for a weekly gain of 0.5%.
The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +1.9912% slid 0.4% to $1.2862 after the first-ever initial reading of the IHS Markit/CIPS flash U.K. services purchasing managers index (PMI) fell to a 40-month low in November. It went to 48.6, from 50 in October. The manufacturing PMI, meanwhile, slipped to a two-month low of 48.3 versus 49.6 in October.
“The weak survey data puts the economy on course for a 0.2% drop in GDP in the fourth quarter, and pushes the PMI further into territory that would normally be associated with the Bank of England adding more stimulus to the economy,” said Chris Williamson, chief business economist at IHS Markit.
“Looking under the hood we can see further signs for concern, with drops in output and new orders and while this could be explained away due to the heightened political uncertainty ahead of next month’s election, there is little doubting the fact that the U.K. economy has pretty much ground to a halt,” said David Cheetham, chief market analyst at finance broker XTB, in a note to clients.
Interest rate increases tend to weigh on the currency of the central bank that is involved. And a weaker pound, which was playing out on Friday, would make U.K. goods cheaper to buy. A swath of FTSE 100 companies are multinational conglomerates and derive their revenue from overseas.
Leading the gains were shares of bank HSBC Holdings /zigman2/quotes/203901799/delayed UK:HSBA -6.30% , up 1.8%. Oil company BP /zigman2/quotes/207305210/lastsale BP -8.48% /zigman2/quotes/202286639/delayed UK:BP -9.35% rose 1% and Royal Dutch Shell /zigman2/quotes/205095589/lastsale RDS.A -9.42% /zigman2/quotes/206428183/delayed UK:RDSA -9.29% was up 1%.
Drug makers and miners were also pushing higher. AstraZeneca /zigman2/quotes/203048482/delayed UK:AZN -1.12% gained 2.3% and Rio Tinto /zigman2/quotes/208934945/delayed UK:RIO -5.92% /zigman2/quotes/202627887/lastsale RIO -4.03% rose 2.2%.