By Carla Mozee, MarketWatch
LONDON (MarketWatch) -- U.K. stocks fell Friday, with real
estate shares under pressure as investors assessed the likelihood
of regulatory and monetary policy changes, including the arrival of
an interest-rate increase sooner than had been anticipated.
The U.K.'s FTSE 100 index dropped 0.5% to 6,810.73. The move
puts the index on track for its first loss in three weeks.
British economic growth "has been much stronger, and
unemployment has fallen much faster than either we or anyone else
expected," a year ago, Bank of England Governor Mark Carney told
business leaders at the annual Mansion House dinner in London late
Thursday.
With that, there's been "already great speculation about the
exact timing of the first [interest] rate hike, and this decision
is becoming more balanced. It could happen sooner than markets
currently expect," Carney said.
The benchmark rate now stands at a record low 0.5%.
Also speaking at Mansion House, Britain's finance minister
George Osborne said he would give the central bank greater power to
curb mortgage lending, in a bid to reduce any risks from the
housing market to financial stability.
Housing stocks swam in the red, with residential property firm
Persimmon PLC losing 5%, Barratt Developments PLC down 3.9%, and
Berkeley Group Holdings PLC fell 4.7%. Real estate investment trust
Hammerson PLC gave up 2.2%.
Financials also struggled as Lloyds Banking Group shed 2.2%,
HSBC Holdings PLC (HSBC) fell 0.8%
Markets had been pricing in a rate hike in around the second
quarter of 2015, but two-year swap rates have risen more than 15
basis points on Thursday's level, said Berenberg in a note
Friday.
Meanwhile, the pound (GBPUSD) jumped in anticipation of a rate
hike, buying $1.6972 compared with $1.6906 late Thursday. Sterling
on Wednesday had fetched about $1.6791.
British stocks also fell alongside other European equity markets
as an escalation of violence in Iraq sent energy prices
soaring.
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