LONDON MARKETS: FTSE 100 Rebounds From 15-month Low After Inflation Slowdown
March 20 2018 - 1:40PM
Dow Jones News
By Carla Mozee and Sara Sjolin, MarketWatch
Fenner jumps on Michelin buyout; home builders up after
Bellway's update
U.K. blue-chip stocks ended higher on Tuesday, recovering from
lows not seen in more than a year and holding gains after the pound
dropped following data that showed there's been a slowdown in
British inflation.
The inflation figures arrived before the Bank of England makes
its next monetary policy decision on Thursday. Focus is also on the
U.S. Federal Reserve, whose policy makers will begin a two-day
meeting later Tuesday.
How markets are moving
The FTSE 100 index ended up 0.3% to 7,061.27, partly rebounding
from its lowest close since Dec. 21, 2016 reached on Monday after a
1.7% slide
(http://www.marketwatch.com/story/ftse-100-adds-to-recent-retreat-as-central-banks-look-set-to-tighten-2018-03-19).
The pound traded at $1.3992, down from $1.4025 late Monday in
New York. Sterling had bought as much as $1.4067 intraday, but
started to move lower after the disappointing inflation
reading.
What's driving markets
Stocks stayed higher after February inflation data were
released. The Office for National Statistics said consumer price
inflation came in at 2.7%, which was lower than the FactSet
consensus estimate of 2.8%. That was also a decrease from 3% in
January, but still well above the Bank of England's target of 2%.
February's slowdown was led by changes in transportation and food
prices, which rose by less than a year ago.
The pound pulled back after the inflation data. A weaker pound
can help stocks on the FTSE 100, as about 75% of revenue for the
index's components are made overseas. A stronger pound can reduce
revenue when it's translated back into sterling.
Policy makers at the BOE will assess the inflation report as
their next policy decision is due Thursday. Analysts widely expect
the central bank to hint that an interest rate rise will take place
in May.
Stateside, the U.S. Federal Reserve will begin its two-day
meeting on Tuesday, and the Fed is expected to raise its benchmark
interest rates on Wednesday.
Read:The pound's post-transition deal bounce might not be here
to stay
(http://www.marketwatch.com/story/the-pounds-post-transition-deal-bounce-might-not-be-here-to-stay-2018-03-19)
Don't miss: What to expect from the new Fed dot plot on interest
rates
(http://www.marketwatch.com/story/what-to-expect-from-the-new-fed-dot-plot-on-interest-rates-2018-03-16)
What strategists are saying
"Monetary Policy Committee hawks who were pushing for an
interest-rate increase sooner rather than later may be given a
lifeline tomorrow as U.K. average earnings look set to increase and
counter today's inflation reading, which will bring a new and more
welcome problem for [Bank of England] Governor [Mark] Carney and
Co.," said Anthony Kurukgy, senior sales trader at Foenix Partners,
in a note.
"With only a slow trend down, inflation risks on the upside, and
U.S. rate pressure building, we are likely to see a few interest
hikes here in the U.K. during 2018. Aegon continues to see the big
risk as interest rates rising above the current yield curve, which
will put downward pressure on fixed- income prices, especially
those such as government bonds with low yield support," said Nick
Dixon, investment director at Aegon, in a note.
Stock movers
Micro Focus shares (MCRO.LN) lost 1.9%. Shares on Monday plunged
46% after the software maker said CEO Chris Hsu has resigned
(http://www.marketwatch.com/story/micro-focus-shares-slump-on-ceo-exit-revenue-warning-2018-03-19)
and warned that revenue for fiscal 2018 will fall more than
previously anticipated.
Home builders were higher after Bellway PLC said it's on track
to deliver record sales
(http://www.marketwatch.com/story/bellway-profit-rises-on-track-for-record-sales-2018-03-20)
for the full year and that pretax profit rose 17% for the first
half of fiscal 2018. Bellway PLC shares (BWY.LN) rose 3.5% on the
midcap FTSE 250 index
On the FTSE 100, Barratt Developments PLC (BDEV.LN) closed 1.3%
higher, Taylor Wimpey PLC (TW.LN) picked up 1.5%, and Persimmon PLC
(PSN.LN) rose 0.8%.
Fenner PLC (FENR.LN) surged 25% on the FTSE 250 as the
polymer-based products manufacturer reached a deal, announced late
Monday, to be purchased by Compagnie Generale des Etablissements
Michelin (ML.FR) in a deal valuing Fenner at GBP1.2 billion pounds
($1.67 billion)
(http://www.marketwatch.com/story/michelin-buys-uks-fenner-for-about-12-billion-2018-03-20).
(END) Dow Jones Newswires
March 20, 2018 13:25 ET (17:25 GMT)
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