LONDON MARKETS: FTSE 100 Wobbles With OPEC Decision In Focus; British Growth Slows
May 25 2017 - 8:20AM
Dow Jones News
By Carla Mozee, MarketWatch
British GDP estimate downwardly revised
U.K. stocks swayed between small gains and losses Thursday, with
oil shares and prices falling as investors waited for official word
about production cuts from the Organization of the Petroleum
Exporting Countries.
The FTSE 100 was up 0.1% at 7,522.76, but had also pushed into
negative territory during morning hours, losing as much as 0.2%.
The basic materials group led declining sectors, but consumer goods
and services and financial shares advanced. The index on Wednesday
closed up by 0.4%
(http://www.marketwatch.com/story/mining-retail-shares-tug-ftse-100-slightly-into-the-red-2017-05-24).
The oil industry is in focus Thursday as OPEC is expected to
announce its highly anticipated decision on whether to extend
production cuts. Cuts were initially agreed in November as a way to
tackle global oversupply.
Read:4 potential outcomes for OPEC's crucial meeting
(http://www.marketwatch.com/story/4-potential-outcomes-for-opecs-crucial-meeting-2017-05-19)
But oil prices slid roughly 2% Thursday, retreating from gains
of roughly 1%
(http://www.marketwatch.com/story/oil-reverses-some-losses-as-investors-get-ready-for-opec-meeting-2017-05-25)
after Saudi Arabia's oil minister Khalid al-Falih ruled out deeper
cuts to oil production
(http://www.marketwatch.com/story/oil-prices-turn-sharply-lower-after-saudi-oil-minister-rules-out-deeper-cuts-2017-05-25)
in any extension to an OPEC output deal.
OPEC's official announcement isn't expected to arrive before 4
p.m. London time, or 11 a.m. Eastern Time, but news reports quoted
an unidentified delegate
(http://www.marketwatch.com/story/opec-agrees-to-extend-output-cuts-for-9-months-reports-2017-05-25-6914855)
as saying a deal was in place for a nine-month extension to output
cuts.
Shares of oil producer BP PLC (BP.LN) (BP.LN) fell 0.9%,
remaining lower after oil prices began selling off, and Royal Dutch
Shell PLC (RDSB.LN) (RDSB.LN) was down 0.4%.
The energy group has a roughly 14% weighting on the FTSE
100.
"OPEC is notorious for failing to deliver, so it'll be touch and
go to see if a deal is reached," said Connor Campbell, financial
analyst at Spreadex, in an early Thursday note. He added that "the
market may also be reliant on dribs and drabs of information rather
than anything substantial," before OPEC's press conference.
GDP: Stocks briefly dipped after the Office for National
Statistics said the U.K.'s first-quarter gross domestic product
estimate was revised lower, to growth of 0.2% from a flash reading
of 0.3%
(http://www.marketwatch.com/story/uk-first-quarter-gdp-growth-revised-down-to-02-2017-05-25).
The reduction stemmed mainly from downward revisions within the
services sector, said ONS.
"It would appear the economic reliance on the consumer is
finally taking its toll with higher prices seen as contributing to
the softer activity in the first quarter," wrote Craig Erlam,
senior market analyst at Oanda.
"With wages now falling in real terms, this doesn't bode well
for the coming quarters and while the Brexit vote may have taken a
little longer than many expected to harm the economy, it would
appear that the initial pain is starting to be felt."
(https://twitter.com/EdConwaySky/status/867669006702039040)
The pound touched an intraday high of $1.3015 as the GDP report
was released, but eventually pulled back to $1.2962, down from
$1.2973 late Wednesday in New York.
A stronger sterling can hurt the FTSE 100 as about 75% of the
revenues for the index's companies are generated overseas.
The dollar broadly slipped Thursday and was choppy late
Wednesday after minutes from the Federal Reserve's latest
policy-setting meeting showed policy makers appeared set to start
shrinking the bank's massive balance sheet.
The minutes also showed that most Fed officials said it would
"soon" be time to raise rates again.
"The fact that the Fed has essentially pre-announced a historic
shift towards shrinking its balance sheet, without a hint of a
'taper tantrum' from the markets, frees up the Fed's hand to pursue
both rate and quantitative policy tightening this year -- a
scenario that markets have yet to fully rationalize," said Lena
Komileva Floyd, chief economist at G+ Economics.
Read:Seeing another rate hike 'soon,' Fed outlines plan to
reduce bond holdings, minutes show
(http://www.marketwatch.com/story/seeing-another-rate-hike-soon-fed-outlines-plan-to-reduce-bond-holdings-minutes-show-2017-05-24)
(END) Dow Jones Newswires
May 25, 2017 08:05 ET (12:05 GMT)
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