UKX FTSE 100 Index

By Carla Mozee, MarketWatch

U.K. construction output at strongest in five months

U.K. blue-chip stocks climbed by the most in nearly a week Monday, with bank shares taking part in a broad-based rally seen as being set off by the passage of a tax overhaul package in the U.S. Senate.

Meanwhile, data that was released showed British construction output growing its fastest pace in five months.

What markets are doing: The FTSE 100 index jumped 0.8% to 7,358.83, with industrial and financial shares leading all sectors higher. The index on Friday fell 0.4% (http://www.marketwatch.com/story/ftse-100-lower-as-bank-stocks-come-under-pressure-2017-12-01), taking last week's loss to 1.5%.

The pound traded at $1.3427, down from $1.3478 late Friday in New York. Against the euro, sterling bought EUR1.1330, on par with Friday's trade.

What's moving markets: U.K. and European stocks started the week in rally mode, taking their cue from gains in U.S. equity futures after the U.S. Senate passed the Republican-sponsored tax reform proposal almost entirely along party lines (http://www.marketwatch.com/story/senate-passes-tax-bill-advancing-top-republican-priority-2017-12-02) on Saturday. Only Democrats and Tennessee Republican Bob Corker voted against it.

Read:Trump celebrates tax-bill victory as opponents vent their fury via #TaxScamBill (http://www.marketwatch.com/story/trump-celebrates-tax-bill-victory-as-opponents-vent-their-fury-via-taxscambill-2017-12-02)

The Senate move increases chances that proposed tax changes will signed into law by President Donald Trump. That would fulfill long-running anticipation in markets over the past year that the Trump administration would usher in what Republicans have touted as business-friendly tax changes. The House and Senate now must agree on a single tax bill before it can be sent to Trump to sign.

Meanwhile, there are reports Monday that there has been progress in Brexit talks over the weekend. U.K. Prime Minister Theresa May is scheduled to meet with European Commission President Jean-Claude Juncker in Brussels on Monday. But the issue of the Irish border has still to be settled, and that is seen as key before the meeting between the two leaders.

What strategists are saying: "Brexit negotiations have reached a crucial stage, with prospects for sterling and the U.K. economy all hinging on whether the U.K. can reach agreement on the outstanding issues in order to move on to free-trade talks and a transition deal," said Rebecca O'Keeffe, head of investment at Interactive Investor, in a note.

"Investors who were hoping that closer agreement on divorce terms would allow Britain to move on to the next stage have found the Irish Border issue a problem. EU citizen rights and the European Court of Justice are also critical. This domino effect makes it difficult to know if a resolution can be reached," said O'Keeffe.

Stock movers: Bank shares worldwide have been pushed higher throughout the past year on expectations of lower taxes in the U.S. Many overseas banks have business interests in the U.S.

In London, shares of Barclays PLC (BCS) (BCS) popped up 2.7%, Royal Bank of Scotland Group PLC (RBS.LN) (RBS.LN) put on 1.4%, HSBC Holdings PLC (HSBA.LN) (HSBA.LN) rose 1%, and Standard Chartered PLC (STAN.LN) picked up 1.1%. Lloyds Banking Group PLC (LLOY.LN)(LLOY.LN) was up 0.8%.

Meanwhile, Sky PLC (SKY.LN) rose 2.7% on reports that there's been a restart in talks by Sky stakeholder 21st Century Fox Inc. (FOX) (FOX) for the potential sale of some of its assets to Walt Disney Co. (DIS) . Those assets could include Sky.

Building higher: House builder shares stayed aloft after IHS Markit/CIPS said its construction output PMI for November hit 53.1. The reading, the highest in five months, outstripped the 51.0 consensus estimate from FactSet.

"Once again, resilient house-building growth helped to offset lower volumes of commercial work and civil engineering activity," said Tim Moore, associate director at IHS Markit, in a note.

Shares of Barratt Developments PLC (BDEV.LN) were up 1.1%, Persimmon (PSN.LN) gained 1% as did Taylor Wimpey PLC (TW.LN). Berkeley Group Holdings PLC (BKG.LN) was up 0.3%.

"Construction firms reported that heightened economic and political uncertainty continued to hold back commercial development activity," said Moore.

(END) Dow Jones Newswires

December 04, 2017 06:06 ET (11:06 GMT)

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