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Burberry was a gainer in a flat day for London stocks amid optimism that sterling’s slump has triggered a rebound in tourism spending.

UBS highlighted data from Global Blue, the tax-free shopping service, suggesting tourist spending was down just 5.2 per cent year-on-year in August, the slowest decline for six months.

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The biggest gains were in the UK and Korea, two of Burberry’s most important markets, where spending jumped 36 per cent and 31 per cent year-on-year respectively, UBS said.

With early signs of improvement in Europe and Hong Kong, Burberry’s like-for-like sales growth is likely to return to positive territory in its quarter ending September, said UBS.

It also argued that the stock, at less than 17 times next year’s earnings, looks cheap against a luxury goods sector that averages 19 times earnings.

Merrill Lynch also advised buying Burberry in an otherwise cautious note on luxury goods brands.

Slowing Chinese luxury consumption adds to structural pressures facing the industry but sterling weakness would benefit the 11 per cent of group revenue Burberry takes from the UK, it said. Burberry rose 3.2 per cent to £13.01.

A tepid wider market led the FTSE 100 lower by 0.3 per cent, down 20.02 points to 6,710.28. An expiry of options and futures contracts meant daily trading volume was the highest in two months with nearly 2bn blue-chip shares changing hands.

Royal Bank of Scotland led the banks lower, losing 4.4 per cent to 185.6p, after Deutsche Bank said it was contesting an unexpectedly large $14bn claim from the US Department of Justice to settle allegations of mis-selling mortgage securities. RBS slipped 4.4 per cent to 185.6p and Barclays was down 2.8 per cent to 164.7p.

RSA Insurance crept to a new two-year high, up 0.3 per cent to 532p, after Morgan Stanley assumed coverage with an “overweight” recommendation and 594p target price.

It forecast RSA to deliver 30 per cent annual earnings growth through 2019, putting the insurer on track to raise its payout ratio and pay a special dividend in 2018.

UK hospital operator Spire Healthcare jumped 8.1 per cent to 390p on a report that Mediclinic, its 30 per cent shareholder, was preparing to bid for the rest. A person familiar with the companies claimed there was no truth to the story.

Mediclinic, which last week warned on profits and is expected to update the market soon on its September-half end, closed 2.4 per cent lower at 919p.

Stock Spirits, the Polish vodka maker, faded 1.6 per cent to 168p on worries about price cutting by its main competitor, Roust.

“Continued share loss or a pricing war could ensue,” said Investec, which started coverage of Stocks Spirits with a “sell”.

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