London Markets: U.K. stocks poised for closing record as U.S.-China ease trade-war tensions

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U.K. stocks rose sharply on Monday, on track for a record close, as traders welcomed news over the weekend that China and the U.S. reached an agreement that eases trade tensions between the world’s two largest economies.

That optimism also sparked a rally in the dollar, which in turn pulled the pound lower, with weakness in sterling helping lift the British stock market.

What are markets doing?

The FTSE 100 index UKX, +0.94%  rose 1% to 7,853.54 setting it on track to take out its previous closing high of 7,787.97, hit last Thursday. It also hit an all-time intraday peak at 7,851.43 in Monday’s session.

The pound GBPUSD, -0.3193%  fell to $1.3432 from $1.3466 late Friday in New York. A weaker pound tends to boost the FTSE 100, as the index’s components conduct the bulk of their business overseas and a softening in sterling lifts revenue when converted back into the U.K. currency.

What is driving the market?

The upbeat trading mood in stocks came after Beijing and Washington agreed to drop their tariff threats. U.S. Treasury Secretary Steven Mnuchin said on Sunday that the U.S. administration would put the trade war with China “on hold” while the two countries work on a deal to reduce the U.S.’s trade deficit with the Chinese. Meanwhile, China agreed to buy more U.S. products, but without specifying a dollar amount.

What are strategists saying?

“It looks like progress on talks between China and the U.S. means we are not about to descend into a punitive trade war. Whilst there is still long way to go, and nothing is agreed until everything is agreed, there has undoubtedly been solid progress and the sense of relief in equity markets is palpable,” said Neil Wilson, chief market analyst at Markets.com.

“But we must note that the FTSE’s gains of late are probably more attributable to a weaker pound as the dollar rallies across the board,” he added.

Which stocks are in focus?

Shares of AstraZeneca PLC AZN, +3.36% AZN, +1.61%  rose 3.2% after the drug giant said the U.S. Food and Drug Administration has approved Lokelma for the treatment of adults with hyperkalemia.

International Consolidated Airlines Group SA IAG, +1.67% ICAGY, -0.81%  added 1.6% after reports the British Airways-parent is planning to make a €1.52 billion offer for Norwegian Air Shuttle ASA NAS, -7.43%

Marks & Spencer Group PLC MKS, +2.95% MAKSY, +2.81%  gained 2.8% after a report in the Sunday Times that the retailer will announce more store closures when it releases results on Wednesday.

Randgold Resources Ltd. RRS, -1.55% GOLD, -1.37%  fell 1.5% as gold prices fell on the back of the rising dollar and improved risk sentiment.

In Ireland, Ryanair Holdings PLC RY4C, +5.40% RYAAY, +3.81%  initially declined, but then swung higher to gain 5%. The volatile action came the budget airline posted a 10% rise in full-year profit but also warned on 2019 profit due to higher oil prices and pressure on fare prices.