UKX FTSE 100 Index

By Sara Sjolin, MarketWatch

Pound struggles to reclaim $1.40 handle

U.K. stocks swung between small gains and losses on Monday, as traders kept an eye on rising U.S. bond yields, which were on the cusp of hitting a key level.

Mining companies continued their push higher, gaining on the back of fears that U.S. sanctions on Russia will significantly hit the supply of certain metals.

What are markets doing?

The FTSE 100 index was down 0.1% to 7,363.47. The London blue-chip index last week rose 1.4% as the pound crumbled. Sterling slid after disappointing economic data and after Bank of England Governor Mark Carney cast doubt on a May interest rate hike.

Read:Here's why the pound got whipped this week -- and why it may bounce back to $1.44 (http://www.marketwatch.com/story/heres-why-the-pound-got-whipped-this-week-and-why-it-may-bounce-back-to-144-2018-04-20)

On Monday, the pound continued to fall, buying $1.3996 compared with $1.3999 late Friday in New York.

What is driving the market?

Share in metals companies were among the biggest advancers again, building on last week's rally, when nickel and aluminum prices jumped to multiyear highs. The sharp rise for those metals came on concerns that Russian nickel producer Norilsk Nickel will be included under U.S. sanctions on Moscow. Concerns over those sanctions are seen as already having led to a rally in aluminum prices.

Aluminum prices rose on again on Monday, but nickel prices declined, according to Reuters.

Traders also kept an eye on U.S. bond yields. The interest rate on 10-year notes was up 3 basis points at 2.984% early on Monday, inching closer to the psychologically important 3% level. The rise in yields came as strengthening inflation prospects added to expectations of a more hawkish approach from the Federal Reserve.

Rapidly rising interest rates can sometimes drive stock markets lower, because of fears they will slow economic growth.

Read: Stock-market investors are freaking out about the bond market--but should they be? (http://www.marketwatch.com/story/the-stock-market-is-freaking-out-up-about-the-bond-marketbut-should-it-be-2018-04-21)

(http://www.marketwatch.com/story/the-stock-market-is-freaking-out-up-about-the-bond-marketbut-should-it-be-2018-04-21)In non-market-related news, the Duchess of Cambridge was admitted to hospital Monday morning in the early stages of labor with her and Prince William's third child.

What are strategists saying?

"Sterling is stable this morning after last week's roller-coaster ride saw it reach recent highs before falling sharply. The probability of a May rate rise halved last week from 90% to 45%, after Mark Carney called into question the possibility, reversing all previous comments which had paved the way for interest rates to rise," said Rebecca O'Keeffe, head of investment at Interactive Investor.

"However, the [Monetary Policy Committee] decision is just one of many factors affecting the outlook for sterling. With U.K. economic growth lagging behind all other major economies, and the path of Brexit once more looking distinctly rocky, sterling's recent strength is in danger of reversing sharply, particularly if Prime Minister May's position comes under further pressure," she added.

The first estimate of U.K. economic growth in the first quarter is due on Friday.

Share movers

Among miners on the rise, shares of Antofagasta PLC (ANTO.LN) added 1%, Rio Tinto PLC (RIO.LN) (RIO.LN) (RIO.LN) climbed 0.8%, and Anglo American (AAL.LN) gained 0.8%.

Whitbread PLC (WTB.LN) shares rose 1.3% after a Sunday Times report that the company's boss Alison Brittain believes a split between the group's hotel and coffee shop businesses is highly likely to happen. Last week, activist investor Elliott Management said it has amassed a stake in Whitbread, calling for the company to spin off its Costa Coffee chain.

Outside the FTSE 100 index, shares of Capita PLC (CPI.LN) rallied 11% after the company announced a new strategy and plans to raise GBP701 million pounds (http://www.marketwatch.com/story/capita-loss-widens-to-issue-1-billion-new-shares-2018-04-23) ($981.4 million) in a rights issue.

(END) Dow Jones Newswires

April 23, 2018 04:46 ET (08:46 GMT)

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