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FTSE 100 hits near two-month high as rate cut remarks enfeeble sterling

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By Reuters
FTSE 100 hits near two-month high as rate cut remarks enfeeble sterling
FILE PHOTO: The London Stock Exchange Group offices are seen in the City of London, Britain, December 29, 2017. REUTERS/Toby Melville/File Photo   -   Copyright  Toby Melville(Reuters)

By Yadarisa Shabong and Muvija M

(Reuters) – London’s FTSE 100 index hit a near-two-month high on Friday, outperforming European peers, as exporters were bolstered by an ailing pound after a Bank of England policymaker hinted at an interest rate cut, while hopes of a U.S-China trade deal also lifted the mood.

The globally-exposed FTSE 100 <.FTSE> jumped more than 1%, surprisingly ending the week in the black thanks to substantial gains in the last two sessions.

A lack of any major chipmaker presence shielded the index from a profit warning from Nasdaq-listed Micron Technology <MU.O>, helping it outperform European’s main index.

The domestically-focused FTSE 250 <.FTMC>, which had broken ranks with sterling, rose 0.8%.

In a first clear sign that the BoE is considering a cut, policymaker Michael Saunders said it may need to cut interest rates in the likely scenario that high levels of uncertainty over Brexit persist.

“This is significant as Saunders has traditionally been a hawkish voice on the Monetary Policy Committee,” CMC Markets analyst Michael Hewson said.

Even as the Oct. 31 Brexit deadline approaches, very little is clear about how or even whether the UK will leave the European Union. Prime Minister Boris Johnson is in a standoff with parliament after vowing to Britain out of the bloc on Oct. 31, with or without a deal.

As a weaker pound boosts the value of exporters’ revenue from overseas, international companies such as oil majors Royal Dutch Shell <RDSa.L> and BP <BP.L> and Asia-facing lender HSBC <HSBA.L> were the biggest boost on the main index.

Hopes that a drawn-out China-U.S. trade dispute might be nearing a solution also helped sentiment after China said on Thursday it was in close communication with the United States over trade talks next month.

Gains of roughly 1% in the last two sessions helped the FTSE 100 recoup some of the losses seen in August, when it suffered its worst monthly fall since October last year due to heightened concerns over global trade and recession.

Friday’s surge has put the index course for its biggest monthly gain since April, albeit a flat quarter.

Leading gains on the main index, Britain’s second-largest homebuilder, Persimmon <PSN.L>, jumped 5.2% after the brokerage Jefferies said Brexit risks had been overplayed in the sector, and upgraded the stock.

A sub-index of housebuilders <.FTNMX3720> touched its highest level in almost a year.

Offshore oilfield services contractor Gulf Marine <GMS.L> pared earlier gains to end 2% up after signing a deal with lenders to provide cash till year-end, while mid-cap utility Pennon Group <PNN.L> scaled a more than one-year high after maintaining targets.

(Reporting by Indranil Sarkar and Muvija M and Shashwat Awasthi in Bengaluru; Editing by Bernard Orr and Kevin Liffey)