LONDON MARKETS: FTSE 100 Drops As Pound Climbs After Strong Retail-sales Data
May 24 2018 - 11:01AM
Dow Jones News
By Sara Sjolin, MarketWatch
Pound rebounds from 2018 low
U.K. stocks traded lower on Thursday as the pound rallied on the
back of better-than-expected retail sales data that brought a Bank
of England interest-rate rise in August back in to play.
The benchmark index extended losses in the afternoon after U.S.
President Donald Trump called off a meeting with North Korea
planned for next month.
What are markets doing?
The FTSE 100 index was trading 0.7% lower to 7,734.26, adding to
a 1.1% loss from Wednesday.
The pound climbed to $1.3388 from $1.3348 late Wednesday in New
York. Sterling fell to a fresh 2018 low on Wednesday, after
official figures showed U.K. inflation unexpectedly declined in
April, seen as dampening expectations for a summer rate hike by the
BOE.
What is driving the market?
However on Thursday, the retail sales report painted a more
upbeat picture of the U.K. economy and suggested the economy may be
able to stomach a rate hike this summer. Retail sales rose 1.6%
month-on-month in April
(http://www.marketwatch.com/story/uk-retail-sales-rebound-from-bad-weather-2018-05-24),
beating forecasts of a 0.2% rise, recovering after a spell of cold
weather.
Investors in the U.K. are watching data closely, after BOE Gov.
Mark Carney emphasized that the central bank's next policy move
depends on an improvement in British economic health.
Stocks across Europe took a leg lower in the afternoon after
Trump called off a planned summit meeting with leader Kim Jong Un
of North Korea that was due to take place on June 12 in Singapore.
Trump said it was inappropriate to go ahead with the meeting based
on the "tremendous anger and open hostility" displayed Kim's most
recent statements.
"The World, and North Korea in particular, has lost a great
opportunity for lasting peace and great prosperity and wealth. This
missed opportunity is truly a moment in history", Trump said in a
letter to the North Korean leader
(https://twitter.com/capitolreport/status/999648470301540353).
Staying in the U.S., Trump rekindled concerns of a global trade
war, announcing an investigation that could lead to import tariffs
on cars
(http://www.marketwatch.com/story/trump-administration-mulls-tariffs-of-up-to-25-on-imported-autos-2018-05-23).
Traders were also still digesting the minutes from the U.S.
Federal Reserve's May 1-2 meeting, which were released late
Wednesday. The account of the gathering suggest
(http://www.marketwatch.com/story/fed-minutes-show-support-for-june-hike-and-calm-about-inflation-outlook-2018-05-23)
that the Fed is on track to raise interest rates in June and is
keeping calm about the inflation outlook.
Check out:How stock-market investors could be surprised by a
peak in interest rates
(http://www.marketwatch.com/story/heres-how-stock-market-investors-could-be-surprised-by-a-peak-in-rates-2018-05-23)
What are strategists saying?
"The pound was buoyed this morning as retails sales beat
expectations across the board. This is a small reprieve for Mark
Carney at the Bank of England, who has insisted that the dip in Q1
GDP was temporary, and that the fundamentals for the U.K. economy
could bounce back and move the central bank closer to an
interest-rate increase. This morning's retail figures indicate this
could happen," said Hamish Muress, currency analyst at OFX, in a
note.
"This bounce for sterling contrasts with yesterday's decline and
shows how the currency is currently trading on the release of every
piece of economic data as it tries to judge how the economy is
performing," he added.
Stock movers
Shares of Tate & Lyle PLC (TATE.LN) rose 8.6% after the food
ingredients maker said adjusted profit rose 13%
(http://www.marketwatch.com/story/tate-lyle-profit-rises-plans-100-mln-cost-cuts-2018-05-24)
in the last fiscal year.
Kingfisher PLC (KGF.LN) rose 1.5% even after the do-it-yourself
retailer
(http://www.marketwatch.com/story/kingfisher-sales-drop-as-cold-hits-footfall-2018-05-24)
said first-quarter sales fell due to bad weather.
Shares of Daily Mail & General Trust PLC (DMGT.LN) lost 9.7%
after the newspaper publisher reported a drop in revenue in the
first half of fiscal 2018
(http://www.marketwatch.com/story/daily-mail-general-trust-pretax-profit-jumps-2018-05-24).
Mediclinic International PLC (MDC.LN) lost 8.7% after the health
care group said it swung to a full-year pretax loss
(http://www.marketwatch.com/story/mediclinic-swings-to-loss-on-swiss-related-charges-2018-05-24)
due to one-time charges related to its Switzerland business and
intangible assets.
United Utilities Group PLC (UU.LN) gave up 1.2% after reporting
a 2.4% fall in fiscal 2018 pretax profit
(http://www.marketwatch.com/story/united-utilities-pretax-profit-slips-in-2018-2018-05-24).
(END) Dow Jones Newswires
May 24, 2018 10:46 ET (14:46 GMT)
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