* FTSE 250 up 4.2%, FTSE 100 up 0.8%
* Brexit deal hopes lift sterling, housebuilders, banks
* Midcaps mark best day since 2010
* Sino-U.S. talks also support wider sentiment
(Adds analyst comments)
By Muvija M and Shashwat Awasthi
Oct 11 (Reuters) - London-listed companies with exposure to
the domestic economy soared on Friday for their best day in
nearly a decade as hopes that Britain can seal a Brexit deal
triggered explosive gains and a major reversal of fortunes for
the much-shunned UK market.
Investors pounced on everything from banks like RBS RBS.L
to housebuilders and retailers such as Kingfisher KGF.L , which
owns DIY chain B&Q, after British Prime Minister Boris Johnson
and his Irish counterpart, Leo Varadkar, said they had found "a
pathway" to a possible Brexit deal. The buying spree targeted some of the market's most
beaten-down stocks and those considered most vulnerable to a
downturn in consumer spending if the country crashes out of the
European Union without a deal.
The FTSE 250 .FTMC surged 4.2%, while the Dublin bourse
.ISEQ , often considered a barometer of Brexit sentiment,
jumped 3.7% to its highest since May.
The blue-chips .FTSE , however, added a modest 0.8% in
comparison as a rally in sterling triggered by Ireland's
optimism of Britain leaving the European Union in an orderly
fashion hit the dollar-earning constituents of the index.
The JP Morgan index that follows UK-listed companies making
their money at home .JPDEUKDM soared nearly 8% on its best day
since the basket was created nearly three years ago.
Four of the so-called UK "big banks", namely RBS RBS.L ,
Lloyds LLOY.L , HSBC HSBA.L and Barclays BARC.L , together
added roughly 12 billion pounds to their combined market cap
with rises of between 2% and 12.3%.
Housebuilders Persimmon PSN.L , Barratt BDEV.L , Berkeley
BKGH.L and Taylor Wimpey TW.L , whose businesses are heavily
reliant on the health of the UK economy, jumped between
8.8%-12%.
"This shows just how beaten down are the share prices and
valuations of those companies which do the majority or all of
their business in the UK", AJ Bell Ivestment Director Russ Mould
said.
"There is still a lot of work to be done. What today does
show is the potential for the UK stock market to rally if there
is a deal and it is accepted."
After nearly three years of chaotic negotiations, signs that
a divorce deal could finally be nailed down were enough to push
London-listed companies with exposure to the domestic economy to
a premium over the FTSE 100 .FTSE for the first time since
Theresa May stepped down as Prime Minister.
The magnified gains for UK stocks come despite Johnson
offering little details on the terms of a divorce deal,
highlighting desperation among traders to cling to any signs of
a positive development.
"The chances of a deal seem to have improved... but hurdles
still remain. Time to thrash out the details of the deal are
tight, and then there is the question of parliamentary
approval," UBS economist Dean A. Turner pointed out.
British lawmakers had defeated former PM May's Brexit plans
three times before she finally gave up and stepped down.
The broader sentiment was also upbeat after U.S. President
Donald Trump stirred hopes of a trade agreement with China,
calling the first day of talks "very good".
"We're enjoying a much more uplifting end to the week as
traders see cause for optimism in the two painful negotiations
that have gripped markets in recent years," Oanda analyst Craig
Erlam said.
The FTSE had confirmed a "Death Cross" pattern in the
previous session as its 50-day moving average (DMA) crossed
below the 200 DMA, a technical pattern usually seen as a warning
that more losses are likely in the near term.
A notable blemish on the main index was a 4% drop in ad firm
WPP WPP.L after French rival Publicis PUBP.PA cut its sales
view for the second time.
Luxury brand Burberry BRBY.L , which advanced in the
previous session on a positive read-across from LVMH LVMH.PA ,
slipped 2.1% after German rival Hugo Boss BOSSn.DE cut its
annual forecast. AIM-listed Dart Group DTG.L surged 17% after the owner of
British airline and tour operator Jet2 raised its annual profit
view and said it had seen stronger demand for some products
since Thomas Cook collapsed. Friday's recovery helped the FTSE 100 notch its best weekly
performance since late August, after it suffered its steepest
weekly fall earlier this month due to escalating U.S.-China
trade tensions and recession fears.
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