UKX FTSE 100 Index

By Carla Mozee, MarketWatch

U.K. cuts Lloyds stake; pound dips below $1.22 after pay data

Blue-chip stocks in the U.K. finished modestly higher Wednesday as bank and mining shares bulked up, but some caution set in during the session after data pointed to a slowdown in British wage growth.

The FTSE 100 finished up 0.2% at 7,368.64, led by gains for mining, industrial, financial and oil and gas issues. The index on Tuesday shed 0.1% (http://www.marketwatch.com/story/ftse-100-on-the-rise-as-pound-drops-to-lowest-since-january-2017-03-14).

Hikma Pharmaceuticals PLC (HIK.LN) finished at the top of the index by jumping 8%. The stock's best session since July 2015 was spurred after the company raised its dividend (http://www.marketwatch.com/story/hikma-pharma-profit-drops-39-dividend-raised-2017-03-15). Hikma did say profit in 2016 fell 39% after booking exceptional costs.

Intraday, stocks pared gains after data from the Office for National Statistics showed rising inflation is chipping into real wage growth for Britons (http://www.marketwatch.com/story/uk-unemployment-hits-4-decade-low-2017-03-15). Regular wages grew by 0.8%, adjusted for inflation, in the three months through January. That is the slowest rate of growth since late 2014.

The unemployment rate, meanwhile, fell to 4.7%, the lowest rate since 1975. The figures arrived before Thursday's Bank of England policy meeting.

"There are clear signs, then, that households are beginning to suffer from a real income squeeze. Because household spending makes up around two-thirds of U.K. demand, this is the main reason why we see the economy slowing down over the course of this year," said Chris Hare, economist at Investec, in a note.

Slowing wage growth isn't a positive development for the housing market, and shares of home builders struggled after the data. Persimmon PLC (PSN.LN) and Taylor Wimpey PLC (TW.LN) dropped 1.1% and 0.6%, respectively, and Barratt Developments PLC (BDEV.LN) gave up 0.4%.

"Because of the soft wage picture, and the prospect of a real income squeeze driving an economic slowdown, the Monetary Policy Committee will be keen to stand pat on monetary policy for the time being," said Hare.

Read: Ginflation? Brits drink so much gin it's now used to calculate inflation (http://www.marketwatch.com/story/ginflation-brits-drink-so-much-gin-its-now-used-to-calculate-inflation-2017-03-14)

Banks: Shares of U.K.-listed banks, most with exposure to the U.S. market, rose ahead of an expected interest-rate hike by the Federal Reserve (http://www.marketwatch.com/story/fed-expected-to-send-hawkish-signals-with-the-dot-plot-2017-03-10). Bank shares globally have been beneficiaries from climbing bond yields and expectations that inflationary pressures will led to higher short-term interest rates, which aids bank margins.

Shares of Royal Bank of Scotland Group PLC (RBS.LN) and Standard Chartered PLC (STAN.LN) each rose 0.8%. Barclays PLC (BCS)(BCS) moved up 0.4% while HSBC PLC (HSBA.LN) (HSBA.LN) edged up a more modest 0.1%.

The Fed decision is due at 6 p.m. London time, or 2 p.m. Eastern Time. A 2:30 p.m. Eastern press conference with Fed Chairwoman Janet Yellen will follow, with investors ready to hear her take on rates moving forward and her assessment of U.S. and global growth conditions.

Read: There's another land of opportunity in the reflation trade -- Europe (http://www.marketwatch.com/story/theres-another-land-of-opportunity-in-the-reflation-trade-europe-2017-03-02)

Meanwhile, Lloyds Banking Group PLC (LLOY.LN) added 0.6% after the U.K. government cut its stake in the lender to about 2.95% (http://www.marketwatch.com/story/uk-cuts-lloyds-stake-to-295-2017-03-15). The government bailed out Lloyds during the financial crisis by taking a 39% stake in the company.

Resources: Miners got a lift as the dollar edged down, aiding a rise in some dollar-denominated metals prices, including copper and platinum .

Glencore PLC (GLEN.LN) (GLEN.LN) moved up 2.9%, Antofagasta PLC (ANTO.LN) tacked on 2.3% and Anglo American PLC (AAL.LN) ended higher by 1.2%.

Meanwhile, shares of oil producer Royal Dutch Shell PLC (RDSB.LN)(RDSB.LN) picked up 0.3% while rival BP PLC (BP.LN) (BP.LN) turned lower to close down 0.2%. The shares had risen during the session as oil prices pushed higher after the U.S. government posted the first domestic decline in crude stockpiles in 10 weeks. (http://www.marketwatch.com/story/oil-price-gain-could-snap-long-losing-streak-with-supply-data-fed-decision-ahead-2017-03-15)

The oil and gas and basic materials groups make up more than 20% of the FTSE 100's weighting, according to FactSet data.

Sterling: The pound was whipped around against the dollar. It traded above $1.22 early Wednesday after a YouGov survey of showed 57% of respondents favored Scotland staying in the U.K., compared with 43% who back independence, according to The Times newspaper. (http://www.thetimes.co.uk/article/scots-want-to-remain-in-uk-new-poll-reveals-57256ptzs)

Scotland's First Minister Nicola Sturgeon next week will ask the Scottish parliament for approval (http://www.marketwatch.com/story/scottish-first-minister-nicola-sturgeon-confirms-plans-for-independence-vote-2017-03-13)to hold a second referendum asking if Scotland should break away from the U.K., which is working on leaving the European Union.

Read: What's going on in Scotland, and what that means for the pound (http://www.marketwatch.com/story/pound-pushed-lower-as-scottish-referendum-worries-emerge-2017-02-27)

The pound later fell below $1.22 following the soft-wages data, but eventually clawed back to $1.2219 late Wednesday in London. (http://www.thetimes.co.uk/article/scots-want-to-remain-in-uk-new-poll-reveals-57256ptzs) (http://www.thetimes.co.uk/article/scots-want-to-remain-in-uk-new-poll-reveals-57256ptzs)Sterling bought $1.2154 late Tuesday in New York.

(http://www.marketwatch.com/story/pound-pushed-lower-as-scottish-referendum-worries-emerge-2017-02-27)See: Opinion: Get ready for sterling's wild ride as the U.K. bolts the EU (http://www.marketwatch.com/story/get-ready-for-sterlings-wild-ride-as-the-uk-bolts-the-eu-2017-03-15)

(END) Dow Jones Newswires

March 15, 2017 13:57 ET (17:57 GMT)

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