By Callum Keown
U.K. stocks gave back earlier gains and the pound slipped on Friday as Brexit concerns and U.S.-China trade tensions resurfaced.
The FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +2.04% was 1.4% up in afternoon trading, as it started to regain lost ground, while the more domestically-focused FTSE 250 /zigman2/quotes/210598417/delayed UK:MCX +0.51% climbed 1.7%.
The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.2763% fell against the dollar and the euro /zigman2/quotes/210561278/realtime/sampled GBPEUR +0.0181% after Britain’s lead negotiator David Frost said “very little progress” had been made in Brexit talks with the European Union.
What’s moving the markets?
The FTSE 100 enjoyed strong early gains on Friday as signs of a recovery in China improved investor sentiment after a late rally on Wall Street on Thursday.
Chinese industrial output rose 3.9% in April as the country’s industrial sector returned to work following weeks of shutdown. The data beat economists’ expectations of a 1% to 1.5% jump and marked the first monthly increase for factory output this year.
However, the optimism soon subsided as Reuters reported that the U.S. Commerce Department was taking steps to block shipments of semiconductors to Huawei. The news added to fear of renewed U.S.-China tensions; earlier this week, President Donald Trump threatened to “cut off” the relationship with Beijing. U.S. stocks opened lower, with the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.05% down 0.1%. Despite slipping back briefly, the FTSE 100 began to claw back some of its lost gains in the afternoon.
Trade concerns also resurfaced closer to home for U.K. investors on Friday.
The pound slipped 0.6% against the dollar and 0.9% against the euro after U.K. negotiator Frost’s report on the EU talks. “It is hard to understand why the EU insists on an ideological approach which makes it more difficult to reach a mutually beneficial agreement,” he said in a statement, calling for a change in EU approach when the next round of talks start on Jun. 1. EU negotiator Michel Barnier described the talks as “disappointing.”
Stocks to watch
BT /zigman2/quotes/209006687/delayed UK:BT.A +1.05% shares soared 5.5% on reports the telecom giant is in talks to sell a £20 billion stake in Openreach — its division that runs the U.K.’s broadband network. The company’s shares tumbled last week after it suspended dividends until 2022 to free up cash for the 5G rollout and fiber broadband expansion.
Royal Mail /zigman2/quotes/204213037/delayed UK:RMG +3.66% shares rose 7.5% after Chief Executive Rico Back surprisingly quit the company less than two years into the role. Coronavirus has also put pressure on the company’s letter business, with 308 million fewer letters delivered in the five weeks to May 3 compared with the previous year, but parcel volumes have soared 31%.