DAILY TRADING STRATEGY

Friday, Jan 26

UK OVERVIEW

U.K. stocks advanced on Thursday, rebounding from a four-week low as shares of heavyweights Diageo and Sky climbed after well-received earnings reports. A continued rally in the pound, however, kept gains for the benchmark index in check. 
The FTSE 100 index gained 0.2% to 7,654.63, partly recouping a 1.1% loss from Wednesday when the benchmark logged its lowest close since Dec. 28. The pound rose to $1.4264, up from $1.4238 late Wednesday in New York and trading at its highest level since June 2016, when the U.K. voted to leave the European Union. Sterling has climbed as high as $1.4329 on Thursday. The FTSE is down 1% for the week so far, pressured by a rally in the pound. Sterling is up 2.9% against the dollar week-to-date and on track for its best week since September last year, partly due to a sliding dollar and partly because investors are growing more confident London and Brussels will agree on a Brexit transition deal in coming months. The strong pound has weighed on the London blue-chip index as it cuts into earnings made by overseas companies, when they convert their profits back into the U.K. currency.
About 75% of the FTSE’s revenue is generated outside Britain, so the index is particularly sensitive to sterling fluctuations. Individual stocks helped drive the FTSE higher on Thursday. Shares of Diageo DEO, +0.17% rose 1.2% after the drinks company posted a 6.2% rise in pretaxfirst-half profit and said the U.S. tax reform will reduce its overall tax rate. Sky PLC put on 0.9% after the media giant posted a 28% rise in first-half pretaxprofit. The company is still waiting for a final decision from U.K. regulators over whether the bid by 21st Century Fox Inc. to acquire full ownership of it can proceed.


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