By Carla Mozee, MarketWatch

U.K. wages data beats or meets, lifting hopes for BOE rate rise

U.K. stocks dropped Wednesday, with investors seen as wary of taking on risky bets before they find out whether the Fed is ushering in another interest-rate hike.

Later, a report on the U.K. labor market will be watched for signs of wage growth, after a disappointing inflation reading hurt prospects for a Bank of England rate rise.

Retailers were among the worst performers on the London benchmark, after a downbeat view on the U.K. from home improvement chain Kingfisher PLC.

How markets are moving

The FTSE 100 index fell 0.3% to 7,042.80, led lower by the basic materials and consumer services sectors. The utility and tech sectors were modestly higher. On Tuesday, the index ended 0.3% (http://www.marketwatch.com/story/ftse-100-rises-off-15-month-low-ahead-of-inflation-data-2018-03-20) higher.

The pound traded at $1.4065, up from $1.3999 late Tuesday in New York.

What's driving markets

The marquee event for global markets is the Fed's policy decision, and markets have priced in expectations that it will raise its benchmark rate by a quarter-percentage point. Investors are watching for hints the U.S. central bank may hike rates four times this year, compared with the three seen.

The Fed's monetary policy tends to drive financial markets globally, as many companies do business in the word's largest economy and it can lift borrowing rates for them. The decision is due at 2 p.m. Eastern Time, or 6 p.m. London time. New Fed Chairman Jerome Powell will hold his first post-announcement press conference at 2:30 p.m. Eastern.

Check out:5 things to watch from the Fed decision (http://www.marketwatch.com/story/5-things-to-watch-from-the-fed-decision-2018-03-19)

Official figures showed U.K. wage growth met or exceeded forecasts in January. Investors were looking for a solid reading to help prompt the Bank of England to raise interest rates in May, after data on Tuesday showed inflation in February was lower than expected. The Bank of England releases its policy decision on Thursday.

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)

The pound gained after the release of the labor data. A stronger pound can hurt stocks on the FTSE 100, as about 75% of revenue for its multinational components is made overseas.

What strategists are saying

"While not currently in the Fed's guidance, just four votes are required for the FOMC to take a more hawkish stance," said Mike van Dulken, head of research at Accendo Markets.

"Furthermore, with Powell championing greater central banker 'transparency', he could surprise by announcing more regular press conferences (outside the usual quarterly), opening the door for more flexibility on hike timing and thus the full four increases this year," he said in a note.

Stock movers

Kingfisher PLC shares (KGF.LN) tumbled 7.6% after the company behind the Screwfix and B&Q stores posted a 10% fall in fiscal 2018 pretax profit fell 10% and said there's been a mixed performance in key markets.

"The U.K. is more uncertain, France is encouraging yet volatile, whilst the market in Poland remains supportive," said Kingfisher CEO Véronique Laury.

Shares of other U.K.-based retailers fell alongside Kingfisher. Whitbread PLC (WTB.LN), which runs Costa Coffee and Premier Inn Hotels, lost 1.9%, and Next PLC (NXT.LN) , which sells apparel and home furnishings, gave up 1.5%. Marks & Spencer Group PLC (MKS.LN) move 1.1%.

Topping advancers, steel maker Evraz PLC (EVR.LN) tacked on 2%.

What's on the economic docket

U.K. average weekly earnings in January rose 2.8%, excluding bonuses, compared with the reading of 2.6% expected. Wages including bonuses were up 2.6%, meeting the forecast from a FactSet survey of analysts.

The unemployment rate fell in January to a four-decade low of 4.3%, the Office for National Statistics said in its labor market report. It was expected to hold at 4.4%.

 

(END) Dow Jones Newswires

March 21, 2018 05:56 ET (09:56 GMT)

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