Monday, 11 June 2018

Sterling rises ahead of manufacturing data and big week for Brexit talks

LONDON (Reuters) - Sterling rose against the dollar on Monday ahead of UK manufacturing data that is expected to show a recovery in the sector after a weak first quarter.

The pound’s gains were limited, however, and traders said the British currency was expected to move sideways until a British parliamentary vote on amendments to Britain’s EU withdrawal bill takes place on Tuesday.

Brexit headlines have returned to dominate sterling trading in recent days, with the EU chief negotiator last week questioning Britain’s “backstop” proposals to deal with the Irish border issue - a sticking point in moving forward negotiations for Britain and the EU’s divorce.

“We expect a fairly neutral pound trading today ahead of the tomorrow’s UK Parliament vote on amendments of the EU withdrawal bill,” ING analysts said, predicting that a loss of one of the votes could lessen the chances of a “hard” or disorderly Brexit and help sterling.

The British currency climbed 0.1 percent to $1.3424 but below last week’s highs of $1.3472. Against the euro the pound fell 0.2 percent to 87.93 pence per euro.

Manufacturing data due at 0830 GMT is expected to show a 0.3 percent rise in April, according to a Reuters poll of economists, better than the fall of 0.1 percent in the previous month.

European banking stocks and Italian shares jumped on Monday after the new Italian economy minister promised to keep the country in the euro, dissipating investors’ fears of a euro zone break-up and boosting sentiment after a fraught G7 summit.

Euro zone banks rose 2.1 percent, boosting the pan-European STOXX 600 by 0.4 percent while Italy's FTSE MIB gained 2 percent and Spain's IBEX  0.9 percent.

Italian bank stocks climbed 2.2 percent, on track for their best day in more than a year as government bonds rallied, with relieved investors buying back into Italian assets after economy minister Giovanni Tria vowed on Sunday to stay in the euro and cut debt levels.

Italian banks Unicredit, Banco BPM and Intesa Sanpaolo were the top boosts to the European index, up 4.4 to 4.8 percent.

Mergers and acquisition news drove the biggest moves in individual stocks.

Top of the STOXX 600 was Inmarsat, surging 12.5 percent to a five-month high after it rejected a takeover offer from U.S. firm Echostar.

Bid speculation over the British satellite company had driven the shares up on Friday but the company’s confirmation came only after the market had closed.

Ocado shares soared 6.6 percent, the top London gainer, after Bernstein analysts gave the British online grocer a double upgrade to “outperform”. The stock is already up 152 percent this year.

Reporting by Helen Reid and Tommy Wilkes

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