By Carla Mozee, MarketWatch
U.K. stocks rose Tuesday, pushed higher alongside other European
equity markets after comments about the European Central Bank's
quantitative-easing program by key bank officials.
Meanwhile, the pound (GBPUSD) fell against the U.S. dollar after
U.K.'s inflation rate turned negative for the first time in
decades.
The FTSE 100 picked up 0.3% to 7,001.91, but the benchmark was
capped by a pullback in Vodafone PLC as well as mining shares.
Overall, stocks climbed after European Central Bank Executive
Board member Benoît Coeuré said because of low liquidity levels
usually seen during the summer period, the ECB will modestly raise
purchases
(http://www.marketwatch.com/story/euro-falls-after-ecbs-coeure-says-bank-will-front-load-qe-buying-2015-05-19)
of euro-area assets in May and June. Such action "will allow us to
maintain our monthly average of EUR60 billion," he said in a speech
Monday
(https://www.ecb.europa.eu/press/key/date/2015/html/sp150519.en.html),
with the text released Tuesday.
Separately, ECB governing council member Christian Noyer said
the European Central Bank is ready to take additional steps
(http://www.marketwatch.com/story/noyer-ecb-will-act-if-inflation-target-isnt-met-2015-05-19)
to boost inflation if its current quantitative-easing program
proves insufficient.
European and U.K. equities have this year been pushed to record
highs, fueled by funding surrounding the EUR1.1 trillion
bond-buying program launched in March. The U.K. is not a member of
the eurozone.
The euro (EURUSD) slid after Coeuré's comments. "Given the rise
in euro and European yields, this may be an attempt by the ECB to
talk them down," said RBC currency strategist Keng Goh in a note.
Against the pound (EURGBP), the euro was buying 71.87 pence, down
from 72.29 pence late Monday.
Back on the FTSE 100, Vodafone PLC shares dropped 3.1%. The
mobile network telecom heavyweight said full-year operating profit
adjusted for exceptional items -- a key performance metric -- fell
19% to GBP3.51 billion as the company invested in its network
(http://www.marketwatch.com/story/vodafone-hails-signs-of-stabilization-in-europe-2015-05-19-24854139).
Revenue rose 10.1%, but excluding handset sales, it fell 1.6%.
In the mining sector, Fitch Ratings said Tuesday it expects
iron-ore prices will stay low for several years in part because of
increasing supply and weak Chinese demand growth. "We expect market
leaders BHP Billiton, Rio Tinto and Vale to continue increasing
production in 2015 despite falling prices, as they are also the
lowest-cost producers," said Fitch. "This is likely to outweigh the
impact of any shut-downs among higher-cost producers in the
near-term."
Shares of BHP Billiton PLC (BHP) were down 2.9%, Rio Tinto (RIO)
fell 1.8% Glencore PLC fell 2.4% and Anglo American PLC fell
1.3%.
Pound: The pound fell to $1.5490 from $1.5653 late Monday after
official data showed U.K. consumer prices fell on the year, the
first such fall since 1960. The consumer price index fell 0.1%
(http://www.marketwatch.com/story/uk-flirts-with-deflation-as-prices-fall-in-april-2015-05-19)
in the year to April after a flat reading in March.
With oil prices recently moving above $60 a barrel, there were
expectations for a slight uptick in the CPI reading, said James
Hughes, chief market analyst, at eToro, in a note. Tuesday's report
shows "that despite efforts to overt the deflationary pressures
many central banks are powerless against the fall, [and] secondly,
that despite oil price fluctuation inflation is still dipping
lower."
Subscribe to WSJ: http://online.wsj.com?mod=djnwires