LONDON MARKETS: FTSE 100 Falls Sharply, Posts Lowest Close Since December 2016
22 Mars 2018 - 6:27PM
Dow Jones News
By Carla Mozee and Victor Reklaitis, MarketWatch
Bank of England holds key rate steady, but two policy makers
sought a hike
London's stock benchmark posted its lowest finish in more than a
year Thursday, as blue-chips were clipped by renewed concerns about
a potential global trade war.
The pound jumped as the Bank of England signaled it is preparing
to raise interest rates, but the gain didn't stick.
How markets are moving
The FTSE 100 index dropped 1.2% to end at 6,952.59, notching its
weakest finish since December 2016. On Wednesday, the benchmark
fell 0.3%
(http://www.marketwatch.com/story/ftse-100-loses-ground-as-retailers-drop-with-fed-decision-in-focus-2018-03-21).
The pound on Thursday hit an intraday high of $1.4217, but has
since traded around $1.4104. That's down from $1.4140 late
Wednesday in New York. Also, sterling rose above EUR1.15 against
the euro for the first time since June 2017, but was recently at
EUR1.1459.
Sterling has risen about 1.1% against the greenback so far this
week, and by roughly 1% against the euro .
What's driving markets
Stocks world-wide were whacked Thursday
(http://www.marketwatch.com/story/dow-poised-to-drop-by-more-than-100-points-2018-03-22)
as the U.S. government planned to announce new trade restraints
against China
(http://www.marketwatch.com/story/trump-xi-set-to-undergo-rockier-phase-as-trade-fight-heats-up-2018-03-22)
renewed fears about a potential trade war that could dent global
economic growth. After the closing bell in London, President Donald
Trump announced new tariffs against the world's second-biggest
economy.
Meanwhile, the pound got a lift after the Bank of England, led
by Gov. Mark Carney, signaled that it's looking at a potential
interest-rate hike as U.K. wage growth improves. Investors had been
pricing in a potential hike in May. The BOE for now held the key
rate at 0.5%, but the vote was 7-2 as policy makers Ian McCafferty
and Michael Saunders wanted a rate increase of 25 basis points.
A stronger pound can hurt stocks on the FTSE 100, as about 75%
of revenue for its multinational components is generated
overseas.
Ahead of the BOE statement, data showed U.K. retail sales grew
by 0.8%
(http://www.marketwatch.com/story/uk-retail-sales-rebound-in-february-2018-03-22)
on month in February, twice the pace seen in a Wall Street Journal
survey of analysts.
The pound had been moving higher against the dollar since late
Wednesday after the Fed signaled it's still on track for three
interest rate increases in 2018, disappointing investors hoping for
four hikes after upbeat inflation and labor data. The U.S. central
bank did raise its benchmark fed-funds rate as expected
(http://www.marketwatch.com/story/fed-lifts-rates-in-powells-first-meeting-says-outlook-has-strengthened-2018-03-21).
The Fed's monetary policy tends to drive financial markets
globally, as many companies do business in the word's largest
economy and it can lift borrowing rates for them.
What strategists are saying
"With traders fearful of levies sparking a trade war, they are
exiting equities," said David Madden, a CMC Markets UK analyst, in
a note.
"It now looks increasingly likely we'll see a rise to 0.75% at
the [Bank of England's] May meeting. Beyond that the outlook is
less clear," said Ben Brettell, senior economist at Hargreaves
Lansdown, in a note.
Stock movers
Reckitt Benckiser Group PLC shares (RB.LN) rallied 4.8% after
the consumer goods company said it's ending talks about its
potential purchase of Pfizer Inc.'s
(http://www.marketwatch.com/story/reckitt-benckiser-ends-talks-to-buy-pfizer-unit-2018-03-22-44851030)(PFE)
consumer health-care business. Reckitt Benckiser said it was
looking to buy just part of the business, but that goal couldn't be
met.
The move is seen as leaving GlaxoSmithKline PLC (GSK.LN) in
prime position to buy the Pfizer assets. GSK shares were down
1.7%.
GKN PLC (GKN.LN) shares turned higher and were up 0.2%. The
engineering company said it continues to view the GBP8.1 billion
($11.4 billion) hostile takeover offer from Melrose Industries PLC
(MRO.LN) as entirely opportunistic
(http://www.marketwatch.com/story/gkn-melrose-offer-still-wholly-inadequate-2018-03-22-44851155).
Its statement came after Melrose announced it had come to an
agreement with GKN's pension-scheme trustees.
Shares of Halma PLC (HLMA.LN) fell 2% after the safety, health
and environmental tech company said foreign-exchange benefits have
reversed and pretax profit for the full year will be in line with
market forecasts
(http://www.marketwatch.com/story/halma-sees-2018-profit-in-line-with-forecasts-2018-03-22).
Check out:Brexit hard-liners fling fish into Thames in bizarre
protest
(http://www.marketwatch.com/story/brexit-hard-liners-fling-fish-into-river-thames-in-bizarre-protest-2018-03-21)
(END) Dow Jones Newswires
March 22, 2018 13:12 ET (17:12 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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