London close: UK and European bourses as geopolitical rhetoric dies down

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London stocks staged a mini 'relief rally' on Monday as the sabre-rattling between USA and North Korea quietened ahead of what will be a busier week for European macroeconomic activity.

By the London close, the FTSE 100 was ahead by 43.93 points or 0.60% to 7,353.89, aided by a fall in the pound against the dollar. Sterling was down 0.23% against the dollar at 1.2980, having maintained levels above 1.3 for most of the last six weeks, while there was a pause in the long slide against the euro, staying roughly flat at 1.1022.

European markets all saw similar moves with the DAX up 1.26% to 12,165.12, the CAC 40 up 1.20% to 5,121.67 and the Stoxx 600 also up by 1.08% to 376.16.

Helping market sentiment amid the thin summer volumes was the simmering down of tensions between the US and North Korea, helped by a phone call between US president Donald Trump and Chinese counterpart Xi Jinping.

Xi urged calm on both sides and told Trump that all sides needed to show restraint and avoid making inflamatory remarks, with both leaders in agreement that North Korea needed to avoid provocative behaviour.

"I don't think this signifies a belief that relations between the two countries will suddenly improve, it's more a case of no news being good news and that will likely continue for as long as it lasts. The problem is that both sides can be rather unpredictable so things could escalate at any point and trigger another dash for safety. Gold, the yen and the Swiss franc may be coming off their highs at the moment but I'm not convinced it will last," said analyst Craig Erlam at Oanda.

Aiding the mood were preliminary Japanese second quarter GDP figures coming in significantly stronger than expected overnight at 4.0% year-on-year versus the 2.5% expected, driven by an increase in domestic consumption.

This was balanced by weaker Chinese industrial production, retail sales and fixed asset investment data, all missing consensus forecasts.

Focus for FTSE traders will shift to data releases due this week including UK average weekly earnings figures on Wednesday and retail sales data due on Thursday morning, but any further comments from Pyongyang or Washington will surely sour the mood of FTSE bulls.

In company news, Standard Chartered topped the leaderboard as the Asia-focused bank and a host of fellow financials sector players rebounded amid a relief of tensions around North Korea. The sector was hit hardest by the sabre-rattling last week, especially those with a heavy reliance on Asia.

That includes insurer Prudential, which was also the subject of newspaper reports that Legal & General had expressed an interest in bidding for a £10bn tranche of its annuity portfolio. The news was likely to fuel speculation of a break-up, The Times suggested following its announcement last week of a major review of operations that will result in the merger of its UK insurance operations with fund manager M&G.

Standard Life Aberdeen also rose as the two Scottish savings and investment groups completed their merger, confirming the make-up of the new combined board.

Elsewhere, travel operator TUI was lifted by an upgrade to 'neutral' from 'underperform' by Credit Suisse given a "material valuation shift" in the shares' value relative to rival Thomas Cook.

Ship broker Clarkson was up slightly after reporting profits tax before rose by a quarter to reach £21.9m at the half-year stage as the shipping services group's top line increased from £147.2m to £156.8m. Clarkson saw an improved outlook with the expectation of a resurgent China, with Graham Spooner at The Share Centre saying, "although the container and dry bulk sectors have been hit by weak demand, the company was boosted by a pick-up in manufacturing across a number of markets including China, the US, Japan and the Eurozone."

Nonetheless, analyst Joshua Mahony at IG said if the morning's data was anything to go by, "China still has some way to go before we can expect global trade to get back on course".

Greencoat UK Wind was unchanged after agreeing to acquire the North Hoyle and Slieve Divena wind farms from institutional investors for close to £105m. The acquisitions, which are expected to be completed in August 2017, will add 90 MW capacity and are being funded by an existing revolving credit facility.

Ladbrokes Coral was down after its shares were downgraded by Credit Suisse as part of a review of the gaming sector, which saw coverage begin on Playtech with an 'outperform' rating and Paddy Power Betfair seen as the top sector pick.

Market Movers

FTSE 100 (UKX) 7,353.89 0.60%
FTSE 250 (MCX) 19,692.47 0.76%
techMARK (TASX) 3,378.51 0.65%

FTSE 100 - Risers

TUI AG Reg Shs (DI) (TUI) 1,290.00p 4.79%
Glencore (GLEN) 331.90p 3.07%
Convatec Group (CTEC) 292.20p 2.20%
Standard Chartered (STAN) 769.30p 2.08%
Smurfit Kappa Group (SKG) 2,268.00p 1.98%
BHP Billiton (BLT) 1,361.00p 1.87%
British Land Company (BLND) 616.00p 1.82%
Scottish Mortgage Inv Trust (SMT) 425.40p 1.67%
Hargreaves Lansdown (HL.) 1,369.00p 1.64%
Paddy Power Betfair (PPB) 7,370.00p 1.59%