UKX FTSE 100 Index

By Carla Mozee, MarketWatch

Small rise bucks trend in Europe, stretching index's gains to 4th session

U.K. blue-chip stocks edged up Friday, as the pound lingered around its lowest level against the dollar in 10 months to give multinationals a boost.

The gain, though slight, bucked the trend in major European and U.S. equity markets, which were in the red after U.S. President Donald Trump said he hopes the country's central bank will stop raising interest rates.

The London benchmark is on course for a fourth straight winning session and a gain for the week.

What are markets doing?

The FTSE 100 index rose 0.2% to 7,699.35, led higher by the consumer goods and basic materials sectors. But the telecom and financial groups were in the red.

On Thursday, the London benchmark on rose 0.1% (http://www.marketwatch.com/story/ftse-100-holds-steady-as-traders-focus-on-retail-sales-data-2018-07-19), and for the week, it's looking at a 0.5% advance, which would be its second in a row.

The pound traded at $1.3007, down from $1.3015 late Thursday in New York. Sterling on Thursday sank below $1.30 to hit its lowest level against the greenback since early September, and the U.K. currency is facing a roughly 1.7% slide against the dollar for the week.

Against the euro, the pound bought EUR1.1172, little changed from EUR1.1178 late Thursday.

What's driving the market

The drop in the pound was helping lift the FTSE 100, because many multinational companies listed on the index generate most of their sales in other currencies.

Sterling was knocked lower after disappointing retail sales data on Thursday dampened hopes that the Bank of England will raise the benchmark interest rate from 0.5% at its meeting on Aug 2.

Bank shares, meanwhile, keyed off a selloff in financial shares on Wall Street on Thursday after Trump said he's not "thrilled" (http://www.marketwatch.com/story/trump-tells-cnbc-he-isnt-thrilled-with-fed-interest-rate-hikes-2018-07-19) that the Federal Reserve is hiking interest rates, saying that could undermine his fiscal stimulus efforts. Higher interest rates can help bolster bank profits, and some U.K. and European lenders have operations in the U.S. market.

Traders may also keep an eye on developments around Brexit, as European Union ministers meet in Brussels to review the British government's latest White Paper proposals for the future relationship between the EU and the U.K.

What are analysts saying?

"Weaker-than-expected inflation and a dismal set of retail sales figures have pinned [the pound-dollar pair] back to the 1.30 level, where it is struggling to hold this morning despite the weakness in USD," said Neil Wilson, chief market analyst for Markets.com, in a note.

"Increasing talk of a no-deal Brexit weighs heavily, and we await the Bank of England in just under two weeks -- whilst a hike seems unwise given the precarious nature of the economy, markets suggest a roughly 50% chance the Monetary Policy Committee will go hawkish (down from 80% last week, we must note). It's a toss of a coin whether GBP rallies from here," Wilson added.

Stocks in focus

Among multinationals companies, British American Tobacco PLC (BATS.LN) climbed 3%, topping the FTSE 100, and rival Imperial Brands PLC (IMBBY) picked up 1.9%. Luxury-goods maker Burberry PLC (BRBY.LN) was up 1% and consumer products heavyweight Reckitt Benckiser Group PLC (RB.LN) moved up 0.9%.

Unilever PLC (ULVR.LN) gained 1.6% to GBP43.94, with Jefferies and Berenberg each raising their price targets on the consumer brands company following its earnings report.

Decliners on the benchmark included buyout firm Melrose Industries PLC (MRO.LN) and insurer Prudential PLC (PRU.LN) as their shares fell 1.1% and 0.9%, respectively.

(END) Dow Jones Newswires

July 20, 2018 05:08 ET (09:08 GMT)

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