UKX FTSE 100 Index

By Carla Mozee, MarketWatch

U.K. construction output at strongest in five months

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

Meanwhile, the pound surged on reports of major progress in negotiations over the U.K.'s exit from the European Union, or Brexit.

What markets are doing: The FTSE 100 index rose 0.5% to 7,340.35, 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 bought $1.3507, and hit an intraday high of $1.3539, according to FactSet data, up from $1.3478 late Friday in New York. Against the euro, sterling bought EUR1.1400, more than EUR1.1330 on Friday.

What's moving markets: U.K. and European stocks started the week in rally mode, rising alongside sharp gains for U.S. stocks (http://www.marketwatch.com/story/dow-futures-soar-200-points-as-markets-get-ready-to-rally-on-tax-plan-progress-2017-12-04) after the U.S. Senate passed the Republican-sponsored tax reform proposal (http://www.marketwatch.com/story/senate-passes-tax-bill-advancing-top-republican-priority-2017-12-02) almost entirely along party lines 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, the pound climbed against major rivals Monday following reports that an agreement on avoiding a post-Brexit hard border between the Republic of Ireland and Northern Ireland was getting close. The former is part of the European Union and the latter is part of the U.K., which plans to exit the bloc in 2019.

"European traders await a crucial update from Brussels later today on the progression of U.K.-EU Brexit negotiations. Hopes are that U.K. Prime Minister [Theresa] May will receive approval from her EU counterpart [Jean-Claude] Juncker to enter the second phase, allowing both sides to begin all-important trade talks," said Accendo Markets research analyst Henry Croft in a note.

Read:U.K., EU move closer to breakthrough in Brexit talks (http://www.marketwatch.com/story/uk-eu-move-closer-to-breakthrough-in-brexit-talks-2017-12-04)

What strategists are saying: "Traders have strongly reacted to this positive [Brexit] development and this has pushed the sterling above the 1.35 mark against the dollar. [I]nvestors would like to see if the strength of sterling would hold," said Think Markets UK's Chief Market Analyst Naeem Aslam in a note.

"Theresa May is meeting EU's Jean- Claude Junker today and anything which raises the confidence that the deal is steering in the right direction would have the ability to push the sterling to the $1.37 mark," he said.

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 2.6%, Royal Bank of Scotland Group PLC (RBS.LN) (RBS.LN) put on 2.1%, and Lloyds Banking Group PLC (LLOY.LN)(LLOY.LN) was up 1%. HSBC Holdings PLC (HSBA.LN) (HSBA.LN) picked up 0.4% and Standard Chartered PLC (STAN.LN) tacked on 0.5%.

Meanwhile, Sky PLC (SKY.LN) rose 2.8% 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 0.8%, Persimmon (PSN.LN) gained 1% and Taylor Wimpey PLC (TW.LN) moved 0.9% higher. Berkeley Group Holdings PLC (BKG.LN) was up 0.8%.

"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 10:12 ET (15:12 GMT)

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