FTSE lags European bounce as Brexit breakthrough hopes lift pound

MILAN: Britain's FTSE fell on Wednesday, lagging a broad-based rebound in European shares as reports of a breakthrough in Brexit talks lifted sterling, hurting the internationally exposed index.

The FTSE was down 0.6 per cent by 0849 GMT, while the pan-European STOXX 600 benchmark climbed 0.6 per cent to its highest level in more than two weeks, buoyed by strength among financial stocks and gains across all sectors.
Britain has offered to pay much of what the EU was demanding to settle a Brexit "divorce bill", bringing the two sides close to agreement on a key obstacle to opening talks on a future free trade pact, EU sources said on Tuesday.

Sterling surged to a two-month high against the dollar, helping send shares in big internationally-exposed, dollar earning FTSE companies such as British American Tobacco , Diageo and GlaxoSmithKline down more than 1 per cent.
"Following last night's jump, (the pound) continued its rise today on hopes of a significant Brexit breakthrough. Shorts are coming out as the squeeze comes on but will the rally last? It's down to the politics again, with various risks to the bullish case still unresolved," said ETX Capital analyst Neil Wilson
In turn the more domestically exposed FTSE Mid 250 index, which benefits from a stronger pound, rose 0.3 per cent. The British mid cap index generates only half of its sales outside the UK, against two thirds for the FTSE.

UK mid-cap Cineworld however fell 13.8 per cent after news that cinema chain is in talks to acquire US peer Regal EntertainmentBSE 0.00 % for about $3.6 billion in cash.

Cineworld said it would finance its bid through a mix of debt and a "material" ri ..
A top faller was Sonova, down 2.8 per cent, hit by a Morgan Stanley downgrade to underweight.

Broader market sentiment was also lifted by signs of progress on US tax cuts, which offset caution following another missile test by North Korea.

In spite of Wednesday's bounce, the STOXX 600 is set to end November with a loss, having fallen around 2 per cent so far this month as investors have been taking profits and earnings growth slowed compared to the previous two quarters ..