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Dec. 4, 2020, 8:44 a.m. EST

BP and Shell boost FTSE 100 as pound rises on Brexit deal hopes

By Barbara Kollmeyer

U.K. stocks climbed on Friday, as major energy companies climbed on higher oil prices and drugmakers gained. Investors were keeping a close on Brexit talks, with the pound rising on hopes for a deal.

The FTSE 100 index (FTSE:UK:UKX) rose 0.9% to 6,548.48, marking the best performance among regional European indexes. The FTSE is set to gain 2.9% for the week, outperforming the Stoxx Europe 600 index (STOXX:XX:SXXP) , which is down 0.1%.

Major oil companies lifted the main index higher, with shares of Royal Dutch Shell  (NYS:RDS.A) (LON:UK:RDSA) and BP  (LON:UK:BP) (NYS:BP) up 3% each. Those gains came as crude oil prices  (NYM:CL.1) continued to rise after the Organization of the Petroleum Exporting Countries and their allies on Thursday  agreed to a gradual rise in crude production  starting in January, defying earlier expectations for an extension of current cuts in output.

“With BP and Shell both cutting dividends earlier in the year, they lost favor among much of the trading community. However, with crude on the rise, and the reinstatement of dividends coming into play, the catch-up trade is on for the major oil companies,” said Joshua Mahony, senior market analyst at IG, in a note to clients.

Investors were also buying shares of leisure-related shares, with International Consolidated Airlines (LON:UK:IAG) , owner of British Airways, up over 5% and hotel group InterContinental Hotels (NYS:IHG) (LON:UK:IHG) up 3%.

Shares of Associated British Foods  (LON:UK:ABF) rose nearly 3%, after the U.K. conglomerate said autumn store closures likely cost it £430 million ($578.4 million) in sales, but that it still expects full-year revenue and profit from fast-fashion chain Primark to  beat fiscal 2020 results .

Shares of Flutter Entertainment (DUB:IE:FLTR) rose nearly 3%. The Dublin-based sports-betting and gambling group said it raised £1.1 billion ($1.4 billion) in a share placement.

Investors will be keeping a close eye on Brexit talks. The pound (XTUP:GBPUSD) rose around 0.2% to $1.3473, after  Reuters reported , citing unnamed European Union officials, that a trade pact between the European Union and the U.K. was “imminent.” 

That is as French European affairs minister Clement Beaune said on Friday that France would veto any trade agreement between the two sides that it felt worked against its own interests. 

“Clearly traders are not particularly concerned about no deal, despite nerves appearing to creep in earlier this week,” said Craig Erlam, senior market analyst, U.K. & EMEA, at Oanda, in a note to clients.

“There’s a lot of talk about a deal potentially being done in the next few days, which means additional weekend risk for the currency, should a deal finally be announced or talks hit an impasse and break down. EU leaders are hoping to review the deal next week at their summit so time really is fast running out,” he said.

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