By Sara Sjolin, MarketWatch
U.K. stocks erased an earlier loss and ended higher on Friday, tracking gains across Europe as worries over an imminent military attack in Syria receded.
The London benchmark, however, underperformed most of its European counterparts, weighed by a stronger pound and a tumble in Sage Group PLC shares after a sales warning.
What are markets doing?
The FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +0.76% rose 0.1% to end at 7,264.56, closing with a 1.1% weekly advance.
The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.6407% rose to $1.4258 from $1.4227 late Thursday in New York. A stronger pound tends to weigh on the British blue-chip index as it can reduce revenue made overseas by multinational companies when it’s converted back into sterling.
What is driving the market?
Traders were cautiously optimistic on Friday after U.S. Defense Secretary Jim Mattis struck a note of caution over the potential for a strike on Syria, hinting the U.S. and its allies would need to take care not to spark a broader conflict with the country’s two biggest backers, Iran and Russia. His comments came after U.S. President Donald Trump also toned down his rhetoric, suggesting in a tweet Thursday that a strike might not be as imminent as thought.
Moreover, Trump suggested the U.S. could rejoin the Trans-Pacific Partnership, which also helped ease the market jitters, analysts said.
What are analysts saying?
“It would be naive in the extreme to suggest that the events of the last 24 hours means that the threat of an escalation of geopolitical factors has passed,” said Michael Hewson, chief market analyst at CMC Markets UK.
“But for now, while the background noise is driving the short-term direction as markets gyrate higher and lower, recent price action might suggest that we could look to head towards the upper end of the trading range in the coming days, particularly if U.S. earnings come in ahead of expectations, starting today with J.P. Morgan /zigman2/quotes/205971034/composite JPM +0.34% and Citigroup /zigman2/quotes/207741460/composite C +0.40% , ” he added in a note.
Which stocks are in focus?
Shares of Sage /zigman2/quotes/204528931/delayed UK:SGE +0.92% posted the biggest loss in the FTSE, ending down 8.2%. The accountancy software company cut its full-year forecast for revenue growth after a disappointing first half to fiscal 2018.
Shares of Rolls-Royce /zigman2/quotes/203384984/composite RYCEY +3.47% also weighed on the London index. They dropped 1.6% after the aircraft engine maker said it needs to carry out additional inspections on some versions of its Trent 1000 engines, leading to higher costs than expected in 2018.
London Stock Exchange Group PLC shares rose 0.8% after appointing Goldman Sachs-veteran David Schwimmer as its new CEO.
Micro Focus International PLC /zigman2/quotes/207956281/delayed UK:MCRO +2.25% gained 3.2%, adding to a 7.6% climb from Thursday that came after reports hedge fund Elliott Management Corp. has build a stake in the U.K. software firm .
On the FTSE 250 /zigman2/quotes/210598417/delayed UK:MCX +1.26% , shares of Hammerson PLC /zigman2/quotes/206876822/delayed UK:HMSO +0.23% slid 9%. The move came after Klepierre SA /zigman2/quotes/205805944/delayed FR:LI +0.22% said it no longer intends to make a takeover offer for the U.K. mall owner after its £5.04 billion ($7.17 billion) proposal was rejected.
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