UKX FTSE 100 Index

By Carla Mozee, MarketWatch

Blue-chip stocks in the U.K. pulled back Monday, with concerns about global trade tensions weighing on sentiment.

How markets are performing

The FTSE 100 index was down 0.4% at 7,648.35, led lower by consumer goods and basic materials stocks, but the telecom sector moved up. The index on Friday slipped 0.1% (http://www.marketwatch.com/story/ftse-100-edges-higher-as-pound-lingers-at-multimonth-lows-2018-07-20) but ended with its second straight weekly gain.

The pound traded at $1.3130, barely budging from $1.3132 late Friday in New York. The pound has recovered ground after last week's drop below $1.30 for the first time in 10 months after weak U.K. retail sales data spurred doubts that the Bank of England will raise interest rates at its Aug. 2 meeting.

Against the euro, the pound bought EUR1.1219, up from EUR1.1203 at last week's finish.

What's driving the market

Finance ministers and central bankers of the G-20 group of countries ended their weekend meeting in Buenos Aires on Sunday warning that "heightened trade and geopolitical tensions" along with other factors pose as downside risks for global economic growth, which at this point "remains robust."

U.S. Treasury Secretary Steven Mnuchin told reporters in Buenos Aires that the European Union, China and Japan must remove tariffs and subsidies before the U.S. discusses trade agreements with those regions. Mnuchin also said "it's definitely a realistic possibility" that U.S. President Donald Trump will follow through on a threat to put tariffs on all $500 billion worth of Chinese imports into the U.S.

Read:G-20 makes little headway on settling global trade tensions sparked by U.S. tariffs (http://www.marketwatch.com/story/g-20-makes-little-headway-on-settling-global-trade-tensions-sparked-by-us-tariffs-2018-07-23)

European Commission President Jean-Claude Juncker will be in Washington on Wednesday to discuss trade issues with Trump.

Meanwhile, bank stocks were mostly lower, with Berenberg saying "U.K. banks remain bruised," in a research note released Monday. "Actual and perceived risks from Brexit, politics and the economic outlook mean sentiment towards U.K. banks has rarely been lower," but greater differentiation between banks is possible. "Avoiding cyclically-exposed banks, in particular Lloyds, is essential," wrote analyst Peter Richardson.

What are analysts saying?

"European markets are suffering under the weight of continued trade fears, with global risk appetite on the wane once more this morning. The FTSE 100 appears to be suffering more than most ... with the sharp appreciation in sterling enhancing the weakness seen throughout global markets," said Joshua Mahony, market analyst at IG, in a note.

"Despite a week of declining UK economic data, the pound has remained well bid, with GBPUSD gaining ground throughout last week. With markets seeing an 85% chance of a rate hike next month, the deterioration in retail sales, core CPI and average earnings seen last week have done little to avert the hawkish sentiment in markets," said Mahony.

Stocks in focus

EasyJet PLC (EZJ.LN) fell 2.2% as rival budget air carrier Ryanair Holdings PLC (RYAAY) posted a 20% decline in first-quarter profit to EUR319 million, hurt in part by higher oil prices and pilot strikes.

"While we continue to actively engage with pilot and cabin crew unions across Europe, we expect further strikes over the peak summer period as we are not prepared to concede to unreasonable demands that will compromise either our low fares or our highly efficient model," said Ryanair in its earnings report.

Hargreaves Lansdown PLC shares (HL.LN) declined 1.6% following a ratings downgrade of investment firm to underperform at Jefferies. "To our minds, the recent [U.K. Financial Conduct Authority's] interim platform review did little to disrupt the economics of the platform industry," said analyst Phil Dobbin in a research note. "But, recent share price moves have pushed HL's valuation in excess of the 10% downside we require for an Underperform [rating] and we reduce our recommendation on this basis alone."

Bank stocks were mostly lower, with Lloyds Banking Group PLC (LLOY.LN) down 0.4%, and Royal Bank of Scotland Group PLC (RBS.LN) shedding 0.4% even as Berenberg said the benefits of the lender's risk-focused strategy remains undervalued. Barclays PLC (BCS) was down 0.8%, while Asia-focused lenders were mixed, with HSBC Holdings PLC (HSBA.LN) up 0.2% while Standard Chartered PLC (STAN.LN) fell 0.7%.

BT Group PLC shares (BT.A.LN) rose 0.7% after the U.K. government outlined plans to boost full-fiber connectivity (http://www.marketwatch.com/story/uk-plans-to-boost-fiber-connectivity-2018-07-23), aiming to have coverage across the entire country by 2033. Off the main benchmark, shares of TalkTalk Telecom Group PLC (TALK.LN) gained 0.8%.

Online grocery delivery platform Ocado Group PLC (OCDO.LN) led advancers on the FTSE 100 by rising 4.6%.

(END) Dow Jones Newswires

July 23, 2018 07:53 ET (11:53 GMT)

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