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LONDON MARKETS : FTSE 100 Slammed As British Pound Advances On Brexit-deal Hopes

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12/07/2017 | 06:53 pm

By Carla Mozee and Sara Sjolin, MarketWatch

Annual growth in house prices slows; May scrambles to nail Brexit issue

U.K. stocks erased earlier gains and closed lower on Thursday, with pressure coming from a stronger pound on hopes Prime Minister Theresa May will meet a Sunday deadline of presenting a Brexit deal to the European Union.

Miners also weighed on sentiment after a warning that Chinese banks may not have enough capital to weather potential losses.

Deal news was brewing in the betting industry, sending shares of Ladbrokes Coral PLC and William Hill PLC higher in the midcap market.

What markets are doing: The FTSE 100 index closed 0.4% lower at 7,320.75 after rising as much as 0.4% earlier in the session.

The pound came off session lows to trade at $1.3424, up from $1.3394 late Wednesday in New York. Against the euro, sterling bought EUR1.1383, turning higher compared with EUR1.1353 in the prior session.

What's moving markets: The EU reportedly gave U.K. leader May until midnight on Sunday (https://news.sky.com/story/eu-hands-theresa-may-72-hour-brexit-deadline-11159939?dcmp=snt-sf-twitter) to put forward a solution to the dispute over the Irish border after Brexit--the last of three issues that have to be resolved before withdrawal talks can move onto the next stage of trade and transition arrangements.

EU leaders are meeting Dec. 14-15 in Brussels, where they will decide whether the U.K. has made "sufficient progress" in the negotiations to enter the second phase of exit talks. A dispute with May's Northern Ireland political allies over the issue of whether to have a "hard" or "soft" border scuttled a potential deal on Monday.

"With Theresa May expected to present another deal to the Irish, market hopes have pushed the pound higher this afternoon," said Joshua Mahony, market analyst at IG, in a note.

"Unfortunately, as Monday highlighted, the ability of Theresa May to appease all sides with a deal is going to be a tough ask, with the DUP's opposition likely to prove a stumbling block," he said.

In other news, the International Monetary Fund has called for banks in China to bump up their capital buffers in the wake of a credit boom in the world's second-largest economy. In a review of China's financial system, the IMF said lenders may not have enough capital to weather potential losses from those credit risks.

Mining stocks in the U.K. can be sensitive to developments in China, where companies are big buyers of precious and industrial metals.

Data from Halifax showed U.K. house prices rose 0.5% in November from October, marking a fifth monthly rise. But annual growth in house prices in the three months to November slowed to 3.9% from October's 4.5% reading.

Stock movers: In the basic materials sector, which makes up a roughly 8% weighting on the FTSE 100, shares of Rio Tinto PLC (>> Rio Tinto plc) (>> Rio Tinto plc) (>> Rio Tinto plc) fell 1.7% and Anglo American PLC (>> Anglo American) lost 0.7%. BHP Billiton PLC (>> BHP Billiton Plc) (>> BHP Billiton Limited) (>> BHP Billiton Limited) dropped 0.6%.

Oil producers BP PLC (>> BP) (>> BP) and Royal Dutch Shell PLC (>> Royal Dutch Shell Plc) (>> Royal Dutch Shell Plc) closed down 1.2% and 1%, respectively, even as oil prices were recovering from sharp declines on Wednesday .

Broadcaster Sky PLC (>> Sky) rose 0.9%. CNBC reported this week that Sky stakeholder 21st Century Fox Inc. (>> 21st Century Fox) is closing in on a deal to sell some assets to Walt Disney Co. (>> Walt Disney Company (The)).

Ladbrokes Coral Group PLC (LCL.LN) surged 29% on the midcap FTSE 250 index as the bookmaker is in GBP3.9 billion takeover talks with GVC Holdings PLC (>> GVC Holdings). GVC shares picked up 5% on the FTSE 250, which itself was down 0.1% at 19,810.27.

William Hill PLC (>> William Hill), also a FTSE 250 component, climbed 8.1% as that bookmaker agreed to support Scientific Games Corp.'s (>> Scientific Games Corp) proposed acquisition of NYX Gaming Group Ltd. (>> NYX Gaming Group Ltd). As part of the agreement, William Hill plans to sell the 6.8 million NYX ordinary shares it owns to Scientific Games.

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