By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- U.K. stocks continued to fall on Monday,
with the investing mood hurt by escalating tensions in Iraq, as
well as by a solid advance in the pound on the back of hints last
week by Bank of England Governor Mark Carney that interest rates
could rise sooner than expected.
The FTSE 100 index fell 0.1% to 6,768.57, after closing down 1%
on Friday.
The weakness in U.K. stocks was partly due to comments from BOE
chief Mark Carney who said late Thursday last week that the first
hike in interest rates could come sooner than markets currently
expect. Several economists now expect the key lending rate to rise
from the current record low of 0.5% by the end of this year rather
than in 2015.
The pound (GBPUSD) rallied after the news and continued its
ascent on Monday, when the U.K. currency breached the $1.70 level
for the first time since 2009.
Another focal point for investors was the rising tensions in
Iraq. A radical Sunni militia last week seized control of several
towns in the north and east of the country, gradually moving closer
to the capital Baghdad. Over the weekend, the insurgents bragged
about the execution of hundreds of Shiite Iraqi soldiers on
Twitter, posting photos to support their accounts.
Oil prices have soared in the wake of the conflict and have
further added to concerns about the impact of higher energy prices
on the broader global economy. On Monday, crude-oil prices (CLN4)
rose to $107.17 a barrel, marking the highest level since September
last year.
U.K. oil companies largely bucked the overall negative trading
trend in the stock market. Shares of Tullow Oil PLC gained 1.1%, BP
PLC (BP) climbed 0.5%, and Royal Dutch Shell PLC (RDSB) added
0.3%.
Among declining stocks, shares of Smith & Nephew PLC lost
2.5% after Medtronic Inc. (MDT) -- who was said to have been
considering a takeover of the U.K. medical-device maker -- on
Sunday said it plans to buy Ireland-based Covidien PLC (COV) in an
almost-$43-billion deal.
Shares of Vodafone Group PLC (VOD) fell 0.4% after the
wireless-telecoms giant said it plans to acquire Cobra Automotive
Technologies SpA for 145 million euros ($197.5 million) to expand
its machine-to-machine capability.
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