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Banks and builders surge on Brexit breakthrough

Banks and builders surge on Brexit breakthrough

Update: Shares in banks and house builders have jumped to the top of the FTSE 100 after the UK reached agreement in the first phase of Brexit talks with the European Commission.

Under the agreement, there will be no hard border between Northern Ireland and the Republic of Ireland and the Good Friday agreement will be upheld.

European Commission president Jean Claude- Juncker said 'sufficient progress' had been made to move onto the next phase of Brexit talks, involving negotiations on a trade agreement.

Stocks focused on the UK domestic economy like house builders jumped to the top of the FTSE 100 on the news.

Berkeley (BKGH), also buoyed by a 36% jump in half-year profits, was up 8.1% at £41.62.

Barratt Developments (BDEV) rose 4.3% to 634p, Persimmon (PSN) jumped 2.5% to £26.72 and Taylor Wimpey (TW) added 2.9% to 202.9p.

Banks meanwhile enjoyed the twin boost of the Brexit breakthrough coupled with new global regulations that were kinder than expected.

Banks won't have to raise as much capital as feared for the new Basel III regime for banks, meaning dividends look safer.

Lloyds (LLOY) jumped 3.6% to 66.8p, Barclays (BARC) was up 2.5% at 196.4p and Royal Bank of Scotland (RBS) added 2.2% to 281.2p.

The FTSE 100 was up 59 points, or 0.8%, at 7,379, boosted by a fall in the pound, down 0.7% against the dollar, as investors banked Brexit gains.

The FTSE 250, which is more focused on the UK domestic economy, rose 0.4%. House builders led the index, with Bellway (BWY) up 4.4% at £36.24 and Crest Nicholson (CRST) rose 3.9% to 526p.

Karen Ward, chief market strategist at JPMorgan Asset Management and a former adviser to chancellor Philip Hammond, said the Brexit breakthrough was 'a very significant step', and that while the next priority would be a transition deal, further talks may not be as much of a driving force for markets.

'Investors should remember the European Union has been in some sort of apparent crisis for six years - we've learnt EU political strategy involved blustering and brinkmanship,' she said.

'As negotiations continue in the background, Brexit fatigue may set in among investors, with more emphasis placed on the day-to-day data.'

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