Recharged hopes of Brexit deal, trade truce power UK shares

By Muvija M and Shashwat Awasthi

(Reuters) - London stocks finished a roller coaster session on Thursday with gains as domestic companies rose after Britain and Ireland said they saw a pathway to a Brexit deal, and international names jumped on to a global rally over hopes of a U.S.-China trade truce.

The FTSE 100 <.FTSE> ended 0.3% higher, after flipping back and forth during the day on mixed signals over the state of affairs between Beijing and Washington, while the midcap index that has a greater UK exposure also rose by the same level.

However, a more than 1% surge in sterling on renewed prospects of a Brexit agreement kept a lid on gains for the blue-chip bourse, which earns a sizeable portion of its earnings in the U.S. dollar.

Spirits company Diageo <DGE.L>, consumer goods giant Unilever <ULVR.L> and AstraZeneca <AZN.L> were among stocks hammered the most, causing the FTSE 100 to lag other major indexes.

Stocks vulnerable to a hit from Brexit, on the other hand, overpowered those losses. Lloyds <LLOY.L> topped the main board with a 4% leap, while Royal Bank of Scotland <RBS.L> added 3%.

Mining heavyweights, which rely on world's top metals consumer China for a chunk of their profits, were the biggest sector-wise boost to the main bourse, climbing 2.5% - their most since early August.

Gains were triggered as hopes of a resolution to a painfully long trade war returned after U.S. President Donald Trump said he will meet Chinese Vice Premier Liu He on Friday.

The comments were well received, given they came after sentiment had turned sour following a report that Beijing has urged Washington to stop unreasonable pressure on Chinese companies.

On news-related moves, FTSE 100 component Mondi <MNDI.L> reversed earlier losses to close 2% higher after a third-quarter update, while homewares retailer Dunelm <DNLM.L> slumped 10% to the bottom of the midcap index after it flagged a softer market.

Still, reflecting recent worries over trade and Brexit, the FTSE 100 confirmed a "Death Cross" pattern as its 50-day moving average (DMA) crossed below the 200 DMA, which is seen a warning sign that more losses are likely in the near term.

The blue-chip bourse last formed the pattern roughly a year ago when Brexit negotiations and Italy's budget deficit had hit risk appetite.

"The ebb and flow of sentiment around U.S., China trade continues to pull global stock markets from pillar to post," CMC Markets' Michael Hewson wrote.

(Reporting by Muvija M and Shashwat Awasthi in Bengaluru; Editing by Bernard Orr and Giles Elgood)