UK shares firm on trade-driven optimism

• The FTSE 250 gained 0.2pc, but thread manufacturer Coats Group underperformed after warning on annual profit.
• Coats' shares dropped more than 10pc to their lowest level in over two-and-a-half years.
• Mid-caps are on course for their fourth straight week of gain.

London's FTSE 100 jumped over 1pc on Friday and recouped almost all losses from the past two sessions, as investors turned cautiously optimistic about a Sino-US trade deal on China's willingness to iron out a pact and as the pound dipped.

The main index's surge was led by trade-sensitive scrips, including HSBC, oil stocks and miners , while the export-heavy FTSE 100's gains were also bolstered by a weaker pound after UK's PMI data was worse-than-expected.

British business this month suffered its deepest downturn since mid-2016 as the approach of a national election exacerbated uncertainty about Brexit.

Gains in the domestically-focussed mid-cap index, however, were capped following the PMI data.

The FTSE 250 gained 0.2pc, but thread manufacturer Coats Group underperformed after warning on annual profit.

Coats' shares dropped more than 10pc to their lowest level in over two-and-a-half years.

Some positivity returned to markets after a report that Washington may delay tariffs on Chinese imports even if a deal is not signed by a Dec. 15 deadline, and after President Xi Jinping said Beijing wanted to work out an initial trade pact.

Trade tensions had flared earlier this week after President Donald Trump threatened to raise tariffs on Chinese imports if no deal was struck, and after US Senate backed a bill supporting protesters in Hong Kong, which was condemned by Beijing.

Blue-chip heavyweights, including Shell and BP , miner Glencore, and industrial stocks such as Rolls-Royce and Melrose climbed higher.

"Investors are mindful of the trade deal's importance in supporting hopes of a global economic recovery next year," FXTM analyst Han Tan said.

"A further escalation in trade tensions would only undermine the world economy's growth momentum while amplifying chatter about a recession."

Despite conflicting trade signals, the blue-chip bourse is currently on track to end the week with a marginal rise and outperform the broader benchmark, as a dip in the pound helps FTSE's exporter components.

Mid-caps are on course for their fourth straight week of gain.

Domestic stocks have been buoyed by polls that point to a likely Conservative Party victory in the upcoming election.

A Tory victory is seen as more likely to see through Brexit and it was this view that led the FTSE 250 to a more than one-year high earlier this week.