By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- Barclays led the U.K.'s FTSE 100 lower
on Tuesday after a weak earnings report, although most U.K. stocks
advanced after better-than-expected data for the services
sector.
Resuming trading after Monday's U.K. bank holiday, the benchmark
index dropped 0.4% to close at 6,798.56.
Shares of Barclays PLC (BCS) posted the biggest loss in London,
down 5.2%, after the bank posted a 5% fall in adjusted
first-quarter profit.
Aberdeen Asset Management PLC fell 2.4%, after the investment
manager reported a drop in first-half earnings.
Heavyweight mining firms were also among decliners, with shares
of Anglo American PLC down 1.4%, BHP Billiton PLC (BHP) off 1%, and
Rio Tinto PLC (RIO) 1% lower.
Most U.K. stocks, however, traded in positive territory, with
investors finding support in strong data for the services sector.
The Markit/CIPS services purchasing managers index for April rose
to 58.7, up from 57.6 in March and beating analyst expectations.
Growth has now been recorded for 16 straight months in the U.K.
services industry, and Rob Wood, chief U.K. economist at Berenberg,
said the U.K. economy is on track for another very strong
quarter.
"Record low interest rates are no longer necessary. The economy
is growing rapidly and, if anything, is picking up pace," Wood said
in a note.
However, the Bank of England is unlikely to raise interest rates
when it meets on Thursday, as it has already signaled that no
changes will be made until the slack in the economy has been
absorbed. Wood said he expects the first 25 basis-point rate hike
to come in the first quarter of 2015, although he said there is a
35% chance it could already happen in the fourth quarter of
2014.
The pound (GBPUSD) strengthened after the data on Tuesday,
reaching the highest level against the dollar since at least 2009.
The pound was last trading at $1.6977, up from $1.6870 in late
North American trading on Monday.
Outside the main index in London, shares of Balfour Beatty PLC
slid 20% after the construction company issued its third profit
warning in 18 months. Chief executive Andrew McNaughton stepped
down Tuesday with immediate effect.
Dixons Retail PLC rose 3.6% and Carphone Warehouse Group PLC
advanced 3.4% after Sky News reported that the two companies are
poised to merge in a 3.7 billion pound ($6.3 billion) deal.
Representatives from the two companies weren't immediately
available to comment.
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