London Markets: U.K. stocks pull back from record, as pound sails to 2-week high

U.K. stocks fell Friday, under pressure as the pound climbed to a nearly two-week high on prospects for a smoother exit for Britain out of the European Union.

The FTSE 100 index

UKX, -0.42%

 gave up 0.4% to 7,527.75, with only the basic materials sector showing a gain. The index was looking at a flat move for the week.

“U.K. stocks began the session downbeat. The correction could deepen into the weekly closing bell as Brexit uncertainties loom before [the] October 19/20 summit in Brussels, while the pound is subject to upside pressures,” said LCG senior market analyst Ipek Ozkardeskaya in a note.

Brexit hopes lift sterling: The London benchmark fell as the pound

GBPUSD, +0.4147%

 climbed above $1.33 for the first time since Oct. 2, according to FactSet data. Sterling was pushed higher after German newspaper Handelsblatt late Thursday reported that the EU may offer a two-year Brexit transition deal to Britain.

On Thursday, the pound dropped below $1.32 after Michel Barnier, the EU’s chief Brexit negotiator, said not enough progress had been made for the EU and the U.K. to start discussing their future trade relationship. The pound’s slide helped usher the FTSE 100 to an all-time record close, with a rise of 0.3% to 7,556.24.

EU officials are set to meet next week from Oct. 19-20, to determine the way forward on Brexit discussions.

But multinationals suffer: A stronger pound tends to hurt shares of multinational companies that make the bulk of their earnings overseas.

Among those companies, consumer products heavyweight Unilever PLC

ULVR, -0.48%

 fell 0.6%, as did drug maker GlaxoSmithKline PLC

GSK, -0.69%

 . Luxury goods maker Burberry Group PLC

BRBY, -1.05%

 shed 0.9%.

Other stock movers: GKN PLC shares

GKN, -5.73%

 dropped 5.8%. The engineering group said Friday its third-quarter margin performance was lower than a year ago, mainly because of operational challenges in its North American aerospace division.

Advancers on the FTSE 100 included educational publisher Pearson PLC

PSON, +1.53%

and miner Rio Tinto PLC

RIO, +1.16%

RIO, +0.69%

RIO, +0.59%

 , with shares up 1.3% and 1.1%, respectively.