By Sara Sjolin and Carla Mozee, MarketWatch

Pound struggles to reclaim $1.40 handle

U.K. stocks stretched a winning streak Monday, as gains for financial shares helped leave the London benchmark for blue chips at its highest since early February.

How did markets perform?

The FTSE 100 index claimed a 0.4% rise to end at 7,398.87. That's the strongest closing level since Feb. 2, according to FactSet data. The index has risen for five straight sessions, the longest run of wins since early March. Telecom, oil and gas and financial shares moved up, but utility stocks put in the worst performance, clipped as bond yields rose.

The benchmark 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 $1.3946 compared with $1.3999 late Friday in New York. In the fixed-income market, the yield on the U.K.'s 10-year gilt rose 3 basis points to 1.526%, according to Tradweb.

Read: Stock investors are freaking out about bonds ending a bull run--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)

What was driving the market?

Advances for bank and insurance stocks helped the FTSE 100 overcome choppy action. Those gains came as bond yields in the U.K. and throughout Europe followed a rise in the U.S. 10-year Treasury yield toward the 3% level (http://www.marketwatch.com/story/us-10-year-yield-rises-to-within-sniffing-distance-of-3-2018-04-23).

Analysts have said rising bond yields, and lower bond prices, are reflecting speculation that higher prices for commodities could prompt the U.S. Federal Reserve to speed up its pace in raising interest rates. While higher interest rates can bolster shares of banks and insurers world-wide, they can weigh on broader equity markets, as borrowing costs for companies go up and investors may ditch equities in search of higher returns.

What are strategists saying?

"The talk of the town continues to be the benchmark U.S. 10-year, whose move towards a 3% yield seemingly has everyone captivated. While some fear that a move through this level will trigger a cataclysm, the reality is probably a tad more prosaic," said IG's chief market analyst Chris Beauchamp in a note. "Equities do look less attractive if fixed-income yields keep rising, but in an environment of still-healthy global growth ... it is perfectly possible for both bonds and equities to keep rising."

Share movers

Among bank stocks, Lloyds Banking Group PLC (LLOY.LN) (LLOY.LN) ended up 1.1%, HSBC Holdings PLC (HSBA.LN) picked up 0.9% and Royal Bank of Scotland Group PLC (RBS.LN) bulked up by 0.6%.

Among insurers and wealth management firms, St. James's Place PLC (STJ.LN) jumped 3.3%, Old Mutual PLC (OML.LN) rose 2.7% and Aviva PLC (AV.LN) added 1%.

Whitbread PLC (WTB.LN) shed 0.1%, reversing earlier gains. A Sunday Times report said 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 13% 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 14:17 ET (18:17 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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