By Josie Cox and Tommy Stubbington
Stronger-than-expected U.K. manufacturing data propelled
sterling to a new 2014 high on Thursday and buoyed stocks, already
supported by upbeat results from Lloyds Banking Group .
The Purchasing Managers' Index in April rose to 57.3 from 55.8
the previous month, boosted by an increase in domestic and overseas
orders. It was expected to ease slightly to 55.
This latest sign of strength for the U.K. economy saw the pound
extend gains, touching $1.6919--the highest level in more than 4
1/2 years.
"Recent survey data further reinforce our confidence that the
recovery remains robust," said Lee Hardman, a currency analyst at
Bank of Tokyo Mitsubishi UFJ.
"If that continues, the Bank of England will come under
increasing pressure to consider tightening monetary policy," a
positive for sterling, he added.
Elsewhere, trade was quiet, with much of Europe out for the May
Day holiday.
The U.K's FTSE 100 broadly tracked gains in the U.S., where the
Dow Jones Industrial Average closed the previous session at a 2014
high, after the Federal Reserve reduced its bond purchase program
in line with expectations. The benchmark U.K. index was 0.4% higher
in by midmorning.
Notable gainers included Lloyds, which reported a 22% rise in
adjusted profit in the first quarter, as bad loans fell in an
improving U.K. economy. British Sky Broadcasting Group climbed too,
after it recorded a fall in profit but a rise in quarterly
revenue.
BSkyB is 39%-owned by 21st Century Fox Inc., which until June
last year was part of the same company as The Wall Street Journal's
parent News Corp.
The euro continued to strengthen against the dollar, rising 0.2%
to a three-week high of $1.3889. The common currency rallied on
Wednesday after euro-zone inflation bounced back from its March
low, dampening expectations of further stimulus from the European
Central Bank.
The pickup in consumer price growth "puts the nail in the coffin
of any potential ECB [quantitative easing] policy, at least in the
short term," said Peter Kinsella, a foreign-exchange strategist at
Commerzbank.
Overnight, Chinese data showed that manufacturing had picked up
slightly in April, suggesting that the economy is recovering after
a lackluster start to the year.
The official purchasing managers index ticked up a notch to
50.4, compared with 50.3 in March, where any number above 50
indicates expansion. The result was in line with the median
forecast of 11 economists polled earlier by The Wall Street
Journal.
In commodities markets, gold was 1% lower at $1,283.40 an ounce,
and Brent crude was down 0.6% at $107.40 a barrel.
Elsewhere, the recent pickup in merger and acquisition activity
continued to dominate headlines. Alstom's chairman on Wednesday
night defied France's government by plunging ahead with plans to
sell parts of its business to General Electric.
In the U.S., meanwhile, AT&T approached DirecTV about a
possible acquisition of the satellite-TV firm, according to people
familiar with the situation, the latest sign of a possible shake-up
in the television industry.
Write to Josie Cox at josie.cox@wsj.com and Tommy Stubbington at
tommy.stubbington@wsj.com