FTSE climbs higher, Sterling holds gains

European Stock Markets

The UK’s top share index climbed on Tuesday following a shaky start to the month, although mining giant Glencore (GLEN.L) fell after one of its subsidiaries received a U.S. subpoena. 

The pound rose on Tuesday as a rebound in risk appetite supported sterling and after a survey showed Britain’s construction industry enjoying its fastest growth in June in seven months.

The British currency rose 0.4 percent versus the dollar to as high as $1.3196, away from 2018 lows hit last week of $1.3050. Sterling made most of those gains before the construction survey numbers were released. 

The blue-chip FTSE 100 .FTSE index was up 0.3 percent at 7,571.59 points by 0855 GMT, making back some of Monday's 1.2 percent loss when concerns over global trade hit risky assets.

The mood was upbeat across the wider European equity trading landscape after German Chancellor Angela Merkel’s conservatives settled a row over migration that threatened to topple her fragile governing coalition late on Monday evening.

On the FTSE, consumer staples, health stocks and financials added the most points to the index.

Shares in IAG (ICAG.L) were among the top gainers, up 2.3 percent on the back of a supportive research note from Credit Suisse in which analysts raised their price target for the British Airways-owner, saying that they expect efficiency gains to drive up margins.

Miners, however, were a weak spot as Glencore (GLEN.L) dropped 12.2 percent to a one-year low. The miner said that a subsidiary had received a U.S. Department of Justice subpoena on compliance with money-laundering laws.

The broader FTSE 350 mining index .FTNMX1770 fell 3.2 percent. The sector has come under pressure from uncertainty over the United States’ trade dispute with China, which has kept a lid on underlying copper prices.

The FTSE 100 has dipped back into negative territory for the year, down 1.5 percent year to date, though it has managed to slightly outperform a 2.1 percent decline for the Euro stoxx .STOXXE index.

British mid caps .FTMC rose 0.4 percent, helped by gains in industrials and consumer stocks.

Deutsche Bank joins growing swell of optimism for UK stocks

Global Stock markets

Deutsche Bank joined a growing chorus of brokers becoming more positive on British stocks on Monday, upgrading its recommendation on UK equities to “overweight”, citing cheap valuations and a predicted boost from a weaker pound. 

“The UK is the cheapest country on our sector valuation scorecard,” said Deutsche Bank’s European equity strategy team in a note.

Concerns that Brexit would undermine the UK economy and the pound had discouraged a number of foreign investors from buying shares in British companies after the June 2016 vote.

The UK’s defensive characteristics - with a heavy weighting in high dividend-yielding sectors - mean it tends to outperform in times when euro zone Purchasing Managers’ Index (PMI) momentum, a gauge of economic health, is negative, the strategists said.

The German bank’s move followed Citi which went overweight on UK stocks on April 5, while UBS Wealth Management closed its underweight recommendation on the market, moving it up to “neutral”.

Britain's blue chip FTSE .FTSE index is down 4.2 percent since the beginning of the year while the Euro zone STOXXE .STOXXE is up 0.5 percent.

Deutsche Bank strategists in the same note downgraded Spanish equities from overweight to benchmark, saying the market would suffer from the Euro zone’s negative economic growth momentum.

The German bank remained underweight Italian, German and French equities, while it kept an overweight recommendation on Switzerland.