FTSE 100 gets sterling boost while Barclays dives after results

By Kit Rees and Helen Reid

LONDON (Reuters) - Strong commodities stocks and a weaker pound helped Britain's top share index recover from three-week lows on Thursday, though Barclays fell sharply after its third quarter update.

The FTSE 100 (FTSE) closed up 0.5 percent, its best day in a week as dollar-earning stocks got a boost from a falling pound after the worst plunge in retail sales since 2008.

British stocks did not however fully join in the strong rally among European equities, boosted by a weaker euro after the European Central Bank committed to extending asset purchases until at least September 2018.

Barclays (L:BARC) was the standout faller, its shares down 7.4 percent to their lowest in a year, after the bank missed estimates for third-quarter profit on the back of weak trading performance at its investment banking division.

Barclays has been the worst-performing bank on the FTSE 100 this year, down 18.6 percent year-to-date.

Barclays' results contrasted with Lloyds' (L:LLOY), whose shares ended Wednesday's session with a slight gain despite an initial wobble.

"The main thing (with Barclays) is there's been a big drop in the income from the investment bank, which is more of a market-wide issue ... and probably a bit of sideways movement in the rest of the business," Laith Khalaf, senior analyst at Hargreaves Lansdown (LON:HRGV), said.

"It's a bit of a damp squib of a set of results."

GlaxoSmithKline (L:GSK) shares fell 3.4 percent, extending Wednesday's post-results losses to hit their lowest since the Brexit vote aftermath, after Credit Suisse (SIX:CSGN) cut its target price on the pharma stock.

Analysts at the Swiss bank pointed to uncertainty over Glaxo's HIV segment ViiV and said the company's post-results call was more cautious than expected.

Healthcare firm Shire (L:SHP) fell 2.1 percent despite earlier receiving European approval for its drug Firazyr to be extended to paediatric patients.

Shore Capital analysts put the drop down to a profit warning from U.S. biotech company Celgene (O:CELG).

"Celgene has been a bellwether for the sector," said ShoreCap analyst Tara Raveendran.

Among mid and small-caps, Spire Health (L:SPI) shares also fell 3.2 percent and Biotech Growth Trust (L:BIOGW) dropped 4 percent.

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Analytics and information firm RELX (L:REL) meanwhile gained 3 percent after a trading update analysts said was in line with expectations.

Foreign-earning consumer goods stocks British American Tobacco (L:BATS) and Unilever (L:ULVR) added the most points to the index, while miners Rio Tinto (L:RIO), Anglo American (L:AAL) and BHP Billiton (L:BLT) also supported.

Galliford Try (L:GFRD) and Barratt Development (L:BDEV) shares fell as they went ex-dividend.

So far the British third-quarter results season has been marred by significant share price drops from large-cap firms such as Convatec (L:CTEC) and Whitbread (L:WTB), as well as profit warnings from small-caps Pendragon (L:PDG) and Dialight (L:DIAL) earlier in the week.

"If you look at UK domestic firms, there's quite a lot of bad news that's expected because Brexit is hanging over results," Hargeaves Lansdown's Khalaf said.

Estimates from Morgan Stanley (NYSE:MS) show earnings are expected to grow by more than 20 percent in the United Kingdom in 2017, against 12.6 percent growth for MSCI Europe.

A high proportion of Britain's earnings growth is driven by the heavyweight energy sector, however, and is also helped by a weaker pound.

Morgan Stanley expects British earnings growth to weaken in 2018 and 2019.