LONDON MARKETS: U.K. Stocks Pull Back From Record High As Inflation Misses Mark
May 23 2018 - 5:10AM
Dow Jones News
By Sara Sjolin, MarketWatch
Trump comments on China, North Korea in focus; M&S rallies
after earnings
U.K. stocks fell from an all-time high on Wednesday, as
geopolitical risks returned to the fore after U.S. President Donald
Trump expressed doubts his high-level meeting with North Korea will
happen.
The pound slumped to a 2018 low after data showed U.K. inflation
unexpectedly fell in April.
What are markets doing?
The FTSE 100 index lost 0.6% to reach 7,832.77, after logging
two straight days of record closes.
The pound dropped to an intraday low of $1.3346, from $1.3432
late Tuesday in New York, after inflation data missed forecasts.
Sterling is now trading around its lowest level since late
December.
What is driving the markets?
Stocks in London declined as part of a broader global selloff
prompted by worries about Trump's latest comments on North Korea
and the China trade talks. The U.S. president said late Tuesday
there is a "very substantial chance" the historic meeting between
him and North Korea's leader Kim Jong Un won't happen in June as
planned
(http://www.marketwatch.com/story/trump-says-summit-with-north-koreas-kim-may-happen-later-than-scheduled-2018-05-22)
unless Pyongyang meets certain conditions.
Separately, Trump said Tuesday said he was "not satisfied" with
the latest round of trade talks with China
(http://www.marketwatch.com/story/trump-today-president-suggests-world--class-poker-player-xi-to-blame-for-shift-in-north-koreas-attitude-about-summit-2018-05-22).
Global equity markets have rallied in recent days on signs of an
easing in tensions between the world's two largest economies,
cooling the risk of a full-blown trade war.
U.K. inflation in focus
Consumer prices rose 2.4% in April, down from 2.5% in March and
missing forecasts of a 2.5% reading.
Earlier this year, the inflation topped 3%, significantly above
the Bank of England's 2% target and squeezing already struggling
households. The high rate of inflation has added pressure on the
central bank to raise interest rates, but Governor Mark Carney says
the economy isn't strong enough to prompt a hike.
The faster-than-expected fall in inflation could ease pressure
on the BOE to hike rates this summer, analysts said.
What are strategists saying?
"U.K. consumers and the Bank of England will both welcome
today's drop in inflation to 2.4%," said Kevin Doran, chief
investment officer at AJ Bell, in a note.
"U.K. consumers will be glad to see average wage increases
starting to outstrip inflation and for the spending power of the
pound in their pocket pick up further. Mark Carney and his team on
the Monetary Policy Committee will be happy to see inflation
continue to fall back towards the 2% target and will reinforce
their decision not to increase interest rates in May," he
added.
The BOE kept rates on hold at its May meeting, citing
weaker-than-expected economic growth. Up until a few weeks before
the decision, markets were pricing in an around 90% chance of a
rate rise.
Check out:One reason the Bank of England might not be in a hurry
to raise rates
(http://www.marketwatch.com/story/heres-a-reason-why-the-bank-of-england-might-not-be-in-a-hurry-to-raise-rates-2018-05-22)
Stock movers
Shares of Marks & Spencer Group PLC (MKS.LN) (MKS.LN) jumped
4.2% after the retailer posted profit ahead of expectations
(http://www.marketwatch.com/story/marks-spencer-2018-pretax-profit-plummets-62-2018-05-23).
Standard Chartered PLC (STAN.LN) rose 2.4% after a report in the
Financial Times that Barclays PLC (BCS) (BCS) is exploring merger
options
(http://www.marketwatch.com/story/barclays-explores-merge-options-ft-2018-05-23),
including a tie-up with Standard Chartered. Barclays sources,
however, dismissed the report
(https://www.reuters.com/article/us-barclays-m-a/barclays-has-no-plans-for-tie-up-with-rival-banks-sources-idUSKCN1IO0OK?utm_campaign=trueAnthem:+Trending+Content&utm_content=5b05162404d301382da1be81&utm_medium=trueAnthem&utm_source=twitter),
according to Reuters.
Babcock International Group PLC (BAB.LN) climbed 3.6% after the
support-services provider said profit before tax increased by 8% in
fiscal 2018
(https://www.google.dk/search?q=babcock&rlz=1C1GGRV_enGB752GB752&oq=babcock&aqs=chrome..69i57j69i60l2j0l3.935j0j9&sourceid=chrome&ie=UTF-8).
(END) Dow Jones Newswires
May 23, 2018 04:55 ET (08:55 GMT)
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