LONDON MARKETS: FTSE 100 Rises, Pound Slides After Bank Of England Cuts Growth Outlook
10 Maggio 2018 - 06:20PM
Dow Jones News
By Carla Mozee and Sara Sjolin, MarketWatch
BT Group warns; Bank of England holds key rate steady
Blue-chip stocks in the U.K. moved higher Thursday, extending
gains as the pound slumped after the Bank of England cut its
outlook for British inflation and economic growth.
Royal Bank of Scotland PLC shares were climbing as the lender
settled a U.S. legal complaint over risky loans.
How markets are moving
The FTSE 100 index rose 0.5% to end at 7,700.97, scoring its
highest close since Jan. 23, according to FactSet data.
The pound traded at $1.3486 versus $1.3547 late Wednesday in New
York, falling after the Bank of England released its monetary
policy decision. Against the euro, sterling bought EUR1.1338
compared with EUR1.1430 in the prior session.
What's driving markets
U.K. stocks rose after the Bank of England. as expected, left
its key interest rate at 0.5%
(http://www.marketwatch.com/story/bank-of-england-holds-key-interest-rate-at-05-cuts-inflation-and-gdp-outlooks-2018-05-10).
The Monetary Policy Committee voted 7-2 to leave the rate
unchanged. In its Quarterly Inflation Report, the bank cut its 2018
second-quarter inflation forecast to 2.4% from 2.7%, and its
forecast for 2018 gross domestic product to 1.4% from 1.8%.
The pound hit an intraday low of $1.3460 just after the bank's
update. A weaker pound tends to boost U.K. stocks as the FTSE 100
companies make the bulk of their revenue overseas.
Bank of England Gov. Mark Carney, in a news conference, said
economic activity in the first quarter was hurt by poor weather
conditions, but that growth likely has been better than reflected
in recent data. If the economy strengthens in line with the central
bank's forecasts, interest rates are likely to rise over the next
three years, he said. Analysts said that means an August rate
increase is still in play, depending on how the data turn out.
Another focus in the U.K. was Royal Bank of Scotland's
(RBS.LN)(RBS.LN) nearly $5 billion settlement with the U.S.
Department of Justice
(http://www.marketwatch.com/story/rbs-to-pay-49-billion-in-settlement-with-department-of-justice-2018-05-10)
over risky loans in the run-up to the financial crisis. RBS ended
3.8% higher.
"It's a happy day for RBS, with the DOJ settlement coming in
well below what we had feared. Of the $4.9 billion fine, around
$3.5 billion has already been provided for, so the impact on future
earnings appears to be at the very low end of expectations," said
Neil Wilson, chief market analyst at Markets.com, in a note.
"This removes the last great barrier to the government selling
off its stake and we would envisage that the [U.K.'s Chancellor of
the Exchequer Philip Hammond] will expedite the disposal of its 71%
shareholding," said Wilson.
What are strategists saying?
--"It's easy to see why the Bank has not acted today, given the
recent dismal run of economic data," said Phil McHugh, chief market
analyst at Currencies Direct, in a note. "We now expect further
pressure on sterling in the short term as we consider this a dovish
hold. In particular, we see further downside pressure in GBP/USD
with a move back towards $1.30 given the growing divergence between
the path of U.K. and U.S. interest rates."
-- "Today's policy communications broadly indicate that if we
see a sufficient recovery in economic data releases through Q2, the
BOE would be content to get on with the job of normalizing bank
rate again, with the next hike even as soon as August," said
Victoria Clarke, economist at Investec, in a note.
Stock movers
BT Group PLC (BT.A.LN)(BT.A.LN) slid 7.4% after the
telecommunications company cut its forecast for fiscal 2019
adjusted earnings and revenue
(http://www.marketwatch.com/story/bt-group-to-axe-13000-jobs-warns-on-profit-2018-05-10).
BT also said it's cutting 13,000 jobs over the next three years as
it steps up its restructuring efforts.
Next PLC shares (NXT.LN) surged 6.1%, topping the FTSE 100,
after the apparel and housewares retailer raised its full-year
pretax profit guidance
(http://www.marketwatch.com/story/next-raises-pretax-profit-guidance-2018-05-10)to
GBP717 million ($971.5 million).
Read:Next's time has come in a tough U.K. retail scene
(http://www.marketwatch.com/story/this-retailers-stock-has-jumped-in-2018-but-still-offers-a-good-deal-2018-01-13)
Randgold Resources Ltd. shares (RRS.LN) (RRS.LN) tumbled 7% as
the gold miner said its first-quarter pretax profit fell 27%
(http://www.marketwatch.com/story/randgold-resources-pretax-profit-drops-27-2018-05-10)
because of lower gold sales and higher production costs.
Economic data
British manufacturing output fell 0.1% in March, a second
straight monthly decline, dragged down by weaker electrical
equipment and pharmaceutical production, the Office for National
Statistics said Thursday.
The U.K.'s visible trade deficit widened to GBP12.28 billion in
March, compared with a FactSet forecast of GBP11.2 billion and
wider than February's deficit print of GBP10.4 billion.
(END) Dow Jones Newswires
May 10, 2018 12:05 ET (16:05 GMT)
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