LONDON MARKETS: FTSE 100 Overcomes U.S. Inflation 'shock' And Recovers Ground
February 14 2018 - 10:48AM
Dow Jones News
By Carla Mozee, MarketWatch
Pound whipped around, bounces above $1.39
U.K. stocks pushed higher in volatile trade Wednesday, as a
pullback in the pound during the session helped the blue-chip
market escape losses that came after the release of U.S. inflation
data.
How markets are performing
The FTSE 100 rose 0.8% to 7,223.66, reclaiming higher ground
after falling as much as 0.3% following U.S. inflation and retail
sales figures. On Tuesday, the benchmark fell 0.1%
(http://www.marketwatch.com/story/ftse-100-wobbles-with-investors-on-edge-2018-02-13)
after a choppy session.
The pound recovered from intraday lows and traded at $1.3901
compared with $1.3894 late Tuesday in New York.
What's moving markets
The FTSE 100 and broader European stock markets briefly swung
lower after the U.S. consumer-price index leapt 0.5% in January
(http://www.marketwatch.com/story/cpi-surges-05-in-january-but-yearly-rate-of-inflation-unchanged-2018-02-14),
the biggest increase in five months. Economists surveyed by
MarketWatch had forecast a 0.4% increase. The CPI over the past 12
months was unchanged at 2.1%, but was above the 1.9% FactSet
consensus estimate.
Separately, U.S. retail sales dropped 0.3% in January
(http://www.marketwatch.com/story/us-retail-sales-slump-in-january---and-december-doesnt-look-so-good-now-either-2018-02-14),
the biggest drop in nearly a year.
But the pound fell to a low of $1.3800 as the dollar advanced on
prospect that the Federal Reserve may have to hike up interest
rates at a faster-than-expected pace as inflation heats up. Such
concerns have contributed to the recent spike in volatility and the
rout in global equities. The pound eventually climbed back above
$1.39, but the FTSE 100 stuck with gains.
A lower pound value can help bolster shares of London-listed
multinational companies, which make the bulk of their earnings
overseas. Among such companies, luxury goods maker Burberry Group
PLC (BRBY.LN)popped up 2% and tobacco maker Imperial Brands PLC
(IMBBY)was up 1.6%.
U.S. stocks were trudging higher after opening Wednesday's
session in the red.
What strategists are saying
"Recovering from the shock of the U.S. inflation data, the FTSE
managed to climb," said Connor Campbell, financial analyst at
Spreadex, in a note.
"This erratic showing was echoed on the forex markets.
Understandably the faster-than-forecast jump in inflation was
catnip for the dollar, which soon found itself up half a percent
against the pound and the euro. However, that growth proved to be
short-lived, with investors seemingly deciding that today's data
didn't change much, with the greenback slipping into the red
against its currency rivals," he said.
Check out:Why this investment pro thinks Wall Street's inflation
fears are overblown
(http://www.marketwatch.com/story/why-this-investment-pro-thinks-wall-streets-inflation-fears-are-overblown-2018-02-13)
Stocks in focus
Sky PLC shares (SKY.LN) tacked on 2.3% after the broadcaster
extended its rights to show Premier League soccer matches through
2022
(http://www.marketwatch.com/story/sky-extends-premier-league-rights-to-2022-2018-02-14),
at a cost of 1.19 billion pounds ($1.65 billion) a year.
Coca-Cola HBC AG shares surged 6.8%. The bottler said full-year
net profit rose 24%,
(http://www.marketwatch.com/story/coca-cola-hbc-net-profit-rises-24-for-full-year-2018-02-14)
after an increase in sales and operating margins.
Shares of Galliford Try PLC (GFRD.LN) tumbled 17% on the mid-cap
FTSE 250 index , as the construction firm said it's aiming to raise
GBP150 million ($208 million)
(http://www.marketwatch.com/story/galliford-looks-to-raise-150-mln-shares-fall-2018-02-14),
likely through a rights issue. The move should help offset the
GBP25 million hit to Galliford's balance sheet stemming from the
collapse of joint venture partner Carillion PLC.
IMF on U.K.
The U.K. must raise productivity and balance its public finances
to brace against the impact of its exit from the European Union, or
Brexit, the International Monetary Fund said Tuesday in an
assessment of the British economy
(http://www.imf.org/en/News/Articles/2018/02/08/na021418-uk-economy-must-get-more-efficient?cid=sm-com-TW).
Building more affordable homes and investing in research are among
the IMF's suggestions on how the U.K. could support productivity
and reduce inequality.
"Since the global financial crisis, employment in the UK has
been increasing steadily, but productivity growth -- the increase
in average output per worker -- has almost stalled. With record-low
unemployment and fewer EU workers coming to the U.K., future
economic growth will depend on increasing the amount that each
employee can produce," the IMF said in its report.
(END) Dow Jones Newswires
February 14, 2018 10:33 ET (15:33 GMT)
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