LONDON MARKETS: FTSE 100 Holds Gains Above 15-month Low After Inflation Slowdown
20 Marzo 2018 - 1:09PM
Dow Jones News
By Carla Mozee, MarketWatch
Fenner jumps on Michelin buyout; home builders up after
Bellway's update
U.K. blue-chip stocks rose Tuesday, slightly recovering from
lows not seen in more than a year and holding gains after data
showed there's been a slowdown in British inflation.
The inflation figures arrived before the Bank of England makes
its next monetary policy decision on Thursday. Focus is also on the
U.S. Federal Reserve, whose policy makers will begin a two-day
meeting later Tuesday.
How markets are moving
The FTSE 100 index was up 0.3% to 7,064.86. Financial and basic
material shares were among the sectors moving higher, but the
health care and utilities groups were losing the most. On Monday,
the index slid 1.7%
(http://www.marketwatch.com/story/ftse-100-adds-to-recent-retreat-as-central-banks-look-set-to-tighten-2018-03-19)
and marked its lowest close since Dec. 21, 2016, according to
FactSet data.
The pound traded at $1.4025, on par with $1.4025 late Monday in
New York. Sterling had bought as much as $1.4067 intraday.
What's driving markets
Stocks stayed higher after February inflation data were
released. The Office for National Statistics said consumer price
inflation rose to 2.7%, which was lower than the FactSet consensus
estimate of 2.8%. That was also a decrease from 3% in January, but
still well above the Bank of England's target of 2%. February's
slowdown was led by changes in transportation and food prices,
which rose by less than a year ago.
The pound pulled back after the inflation data. A weaker pound
can help stocks on the FTSE 100, as about 75% of revenue for the
index's components are made overseas. A stronger pound can reduce
revenue when it's translated back into sterling.
Policy makers at the BOE will assess the inflation report as
their next policy decision is due Thursday. Analysts widely expect
the central bank to hint that an interest rate rise will take place
in May.
Later Tuesday, the U.S. Federal Reserve will begin its two-day
meeting, and the Fed is expected to raise its benchmark interest
rates on Wednesday.
Read:The pound's post-transition deal bounce might not be here
to stay
(http://www.marketwatch.com/story/the-pounds-post-transition-deal-bounce-might-not-be-here-to-stay-2018-03-19)
Don't miss: What to expect from the new Fed dot plot on interest
rates
(http://www.marketwatch.com/story/what-to-expect-from-the-new-fed-dot-plot-on-interest-rates-2018-03-16)
London blue-chip stocks on Monday sank to their lowest since
December 2016 after the pound rallied on news the EU and U.K. have
agreed on the broad terms of a Brexit transition deal. The
agreement was seen as cutting down the possibility that the U.K.
will leave the bloc next year without a firm agreement on terms
related to trade and other issues.
Global stock markets on Monday suffered as U.S. equities slid,
dragged down by tech-sector losses led by Facebook Inc. (FB) ,
which is coming under official scrutiny over its use of member
data.
What strategists are saying
"Monetary Policy Committee hawks who were pushing for an
interest rate hike sooner rather than later may be given a lifeline
tomorrow as U.K. average earnings look set to increase and counter
today's inflation reading, which will bring a new and more welcome
problem for [Bank of England] Governor [Mark] Carney and Co.," said
Anthony Kurukgy, senior sales trader at Foenix Partners, in a
note.
"With only a slow trend down, inflation risks on the upside, and
U.S. rate pressure building, we are likely to see a few interest
hikes here in the U.K. during 2018. Aegon continues to see the big
risk as interest rates rising above the current yield curve, which
will put downward pressure on fixed- income prices, especially
those such as government bonds with low yield support," said Nick
Dixon, investment director at Aegon, in a note.
"With fixed-income vulnerable and equity volatility rising, we
see additions to cash weightings as a prudent step for the majority
of investors," Dixon added.
Stock movers
Micro Focus shares (MCRO.LN) rose 2%. Shares on Monday plunged
46% after the software maker said CEO Chris Hsu has resigned
(http://www.marketwatch.com/story/micro-focus-shares-slump-on-ceo-exit-revenue-warning-2018-03-19)
and warned that revenue for fiscal 2018 will fall more than
previously anticipated.
Home builders were higher after Bellway PLC said it's on track
to deliver record sales
(http://www.marketwatch.com/story/bellway-profit-rises-on-track-for-record-sales-2018-03-20)
for the full year and that pretax profit rose 17% for the first
half of fiscal 2018. Bellway PLC shares (BWY.LN) rose 3% on the
mid-cap FTSE 250 index
On the FTSE 100, Barratt Developments PLC (BDEV.LN) shares were
up 1.1%, Taylor Wimpey PLC (TW.LN) picked up 1.1%, and Persimmon
PLC (PSN.LN) rose 0.5%.
Fenner PLC (FENR.LN) surged 25% on the FTSE 250 as the
polymer-based products manufacturer reached a deal, announced late
Monday, to be purchased by Compagnie Generale des Etablissements
Michelin (ML.FR) in a deal valuing Fenner at GBP1.2 billion pounds
($1.67 billion)
(http://www.marketwatch.com/story/michelin-buys-uks-fenner-for-about-12-billion-2018-03-20).
(END) Dow Jones Newswires
March 20, 2018 07:54 ET (11:54 GMT)
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