LONDON MARKETS: U.K. Stocks Pull Back From Record High With Inflation Data On Deck
May 23 2018 - 4:24AM
Dow Jones News
By Sara Sjolin, MarketWatch
M&S rallies after earnings
U.K. stocks fell from an all-time high on Wednesday, as
geopolitical risks returned to the fore after U.S. President Donald
Trump expressed doubts his high-level meeting with North Korea will
happen.
The U.K. inflation report due Wednesday morning was also in the
spotlight, as the data may weaken or strengthen the case for a Bank
of England interest rate rise this summer, analysts said.
What are markets doing?
The FTSE 100 index lost 0.4% to reach 7,845.32, after logging
two straight days of record closes.
The pound dropped to $1.3381 from $1.3432 late Tuesday in New
York. Sterling is now trading around its lowest level since late
December.
What is driving the markets?
Stocks in London declined as part of a broader global selloff
prompted by worries about Trump's latest comments on North Korea
and the China trade talks. The U.S. president said late Tuesday
there is a "very substantial chance" the historic meeting between
him and North Korea's leader Kim Jong Un won't happen in June as
planned
(http://www.marketwatch.com/story/trump-says-summit-with-north-koreas-kim-may-happen-later-than-scheduled-2018-05-22)
unless Pyongyang meets certain conditions.
Separately, Trump said Tuesday said he was "not satisfied" with
the latest round of trade talks with China
(http://www.marketwatch.com/story/trump-today-president-suggests-world--class-poker-player-xi-to-blame-for-shift-in-north-koreas-attitude-about-summit-2018-05-22).
Global equity markets have rallied in recent days on signs of an
easing in tensions between the world's two largest economies,
cooling the risk of a full-blown trade war.
U.K. inflation in focus
The inflation report for April is likely to be the highlight of
the day. Economists expect consumer prices rose 2.5% last month,
the same as in March.
Earlier this year, the level topped 3%, significantly above the
Bank of England's 2% target and squeezing already struggling
households. The high rate of inflation has added pressure on the
central bank to raise interest rates, but Governor Mark Carney says
the economy isn't strong enough to prompt a hike.
The inflation report is due at 9:30 a.m. London time, or 4:30
a.m. Eastern Time.
What are strategists saying?
"Should we see another undershoot by inflation this month,
optimism of a late summer rate hike would be dented, pulling the
pound lower towards $1.33. Given the pound's inverse relationship
with the FTSE, a weaker pound could help the FTSE on its way to
fresh uncharted territory on target to 8,000," said Jasper Lawler,
head of research at London Capital Group, in a note.
"On the contrary, a surprise to the upside could be enough to
boost the pound back towards $1.36, which would bring the FTSE back
from its current lofty levels and record highs," he added.
Check out:One reason the Bank of England might not be in a hurry
to raise rates
(http://www.marketwatch.com/story/heres-a-reason-why-the-bank-of-england-might-not-be-in-a-hurry-to-raise-rates-2018-05-22)
Stock movers
Shares of Marks & Spencer Group PLC (MKS.LN) (MKS.LN) jumped
4.2% after the retailer posted profit ahead of expectations
(http://www.marketwatch.com/story/marks-spencer-2018-pretax-profit-plummets-62-2018-05-23).
Standard Chartered PLC (STAN.LN) rose 2.4% after a report in the
Financial Times that Barclays PLC (BCS) (BCS) is exploring merger
options
(http://www.marketwatch.com/story/barclays-explores-merge-options-ft-2018-05-23),
including a tie-up with Standard Chartered. Barclays sources,
however, dismissed the report
(https://www.reuters.com/article/us-barclays-m-a/barclays-has-no-plans-for-tie-up-with-rival-banks-sources-idUSKCN1IO0OK?utm_campaign=trueAnthem:+Trending+Content&utm_content=5b05162404d301382da1be81&utm_medium=trueAnthem&utm_source=twitter),
according to Reuters.
(END) Dow Jones Newswires
May 23, 2018 04:09 ET (08:09 GMT)
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