LONDON MARKETS: FTSE 100 Slumps 1% As Fed Signals Faster Pace Of Rate Hikes
February 22 2018 - 6:41AM
Dow Jones News
By Carla Mozee, MarketWatch
Barclays to raise dividend, shares jump
U.K. stocks fell by the most in two weeks Thursday, with
broad-based losses appearing after Federal Reserve meeting minutes
suggested policy makers will raise U.S. borrowing rates at a
faster-than-expected pace.
Stocks were stuck in the red after data indicated U.K. economic
growth wasn't as strong as previously estimated. Among the market's
few advancers was banking heavyweight Barclays PLC after the
release of its financial results.
How markets are moving
The FTSE 100 indexfell 1% to 7,212.59, on course for its worst
session since Feb.9, according to FactSet data . All but the
utility and health care sectors advanced. The consumer goods and
industrials sectors lost the most. On Thursday, the benchmark rose
0.5%
(http://www.marketwatch.com/story/ftse-100-slips-as-gains-for-lloyds-glencore-fail-to-spread-cheer-2018-02-21).
The pound fell to $1.3886 from $1.3919 late Wednesday in New
York.
The yield on the 10-year gilt rose 1 basis point to 1.56%,
according to Tradeweb. Yields rise when prices fall.
Check out: More investors looking to cut U.K. assets as Brexit
uncertainty persists
(http://www.marketwatch.com/story/more-investors-looking-to-cut-uk-assets-as-brexit-uncertainty-persists-2018-02-16)
What's driving markets
Investors yanked down U.K. and European equities as U.S. stock
futures slumped early Thursday
(http://www.marketwatch.com/story/dow-futures-slide-more-than-100-points-as-fed-driven-jitters-persist-2018-02-22)
in the wake of Wall Street's selloff Wednesday.
U.S. stocks retreated from a rally Wednesday
(http://www.marketwatch.com/story/dow-futures-inch-lower-as-investors-brace-for-fed-minutes-2018-02-21)
after minutes of the Fed's January meeting
(https://www.federalreserve.gov/monetarypolicy/fomcminutes20180131.htm)
showed officials see an "increased likelihood" of further interest
rate hikes, heightening prospects of a rate rise in March. Policy
makers now see the world's largest economy getting stronger than it
was at the end of 2017.
That news helped push the U.S. 10-year Treasury note yield up
closer to the 3% mark, and lifted the U.S. dollar . In turn, the
stronger greenback pulled down prices of dollar-denominated
commodities such as copper , gold and oil
(http://www.marketwatch.com/story/oil-prices-slump-as-dollar-gets-boost-from-hawkish-fed-minutes-2018-02-22)
and those moves hurt shares of metal and energy producers. Shares
of oil giants Royal Dutch Shell PLC (RDSB.LN) and BP PLC (BP.LN)
fell 0.5%, respectively, in London trade.
Economic data
The Office for National Statistics revised down its previous
estimate of U.K. GDP growth
(https://www.marketwatch.com/story/uk-economy-lagged-more-than-thought-in-2017-2018-02-22https:/www.marketwatch.com/story/uk-economy-lagged-more-than-thought-in-2017-2018-02-22)
in the fourth quarter to 1.4% from 1.5% year-on-year. The shutdown
of a major oilfield for repairs in December hit oil-and-gas
production harder than first believed, the ONS said.
What strategists are saying
"That stock markets remain in a volatile state is perfectly
illustrated by the latest session on Wall Street. Just as it seemed
traders had acclimatized to inflation, rising interest rates and
higher bond yields, the fears that caused this month's crash were
reignited by minutes from the Federal Reserve's last meeting," said
Lee Wild, Interactive Investors's head of equity strategy, in a
note.
"We've known for some time that U.S. policy makers might squeeze
in extra rate hikes in 2018, so it's possible this new sell-off is
just a knee-jerk reaction to the minutes. However, the Fed must
prevent [U.S. President Donald] Trump's pro-business reforms
overheating the U.S. economy, and there's risk here that central
bankers mismanage the rate-hike cycle," said Wild.
Stock movers
Barclays shares (BCS) surged 5.7% after the bank said it would
more than double its dividend next year
(http://www.marketwatch.com/story/barclays-swings-to-loss-vows-to-double-dividend-2018-02-22-34852558)
even as the bank swung to a full-year loss of GBP1.9 billion ($2.64
billion).
Centrica PLC (CNA.LN) climbed 4% as the British Gas parent said
it will cut 4,000 jobs by 2020 in an aim to reduce costs. Annual
adjusted operating profit dropped 17% to GBP1.25 billion.
Anglo American PLC shares (AAL.LN) dropped 3.3% after the miner
posted 2017 net profit of $3.17 billion
(http://www.marketwatch.com/story/anglo-american-profit-almost-doubles-in-2017-2018-02-22),
missing the $3.25 billion consensus estimate from FactSet.
British American Tobacco PLC (BATS.LN) fell 4.7%. The maker of
Lucky Strike and Dunhill cigarettes
(http://www.marketwatch.com/story/bat-2017-profit-soars-on-reynolds-american-buy-2018-02-22)
said its pretax profit increased more than fourfold in 2017, on
gains related to the acquisition of Reynolds American Inc. and
credits related to U.S. tax reform. Volume of sales of cigarette
and tobacco-heated products fell 2.6%.
(END) Dow Jones Newswires
February 22, 2018 06:26 ET (11:26 GMT)
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