LONDON MARKETS: FTSE 100 Edges Down After Weak Retail Sales, Logs Worst Week In 5 Months

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Rio Tinto rallies after upgrade

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U.K. stocks ended Friday's choppy session with a slight loss, as commodity shares came under pressure, leaving the benchmark FTSE 100 with its worst weekly performance in five months.

Stocks had continued to search for firm direction even after a drop in the pound, with that move spurred by March retail sales that missed the mark and raised the prospect of a slowdown in British economic growth.

The FTSE 100 index closed down 0.1% at 7,114.55, with basic materials shares swinging lower and oil shares tracking a selloff in crude prices. But the utilities sector, considered defensive, ended higher alongside industrial, health care and financial shares.

European stocks overall eked out minor gains, but French stocks dropped (http://www.marketwatch.com/story/french-stocks-slide-after-paris-attack-fuels-election-uncertainty-2017-04-21).

"Trading sentiment is increasingly cautious in front of Sunday's first round of voting for the French presidential election that is too close to call," said Richard Perry, market analyst at Hantec Markets, in a note. "With so many variables according to the polls, traders do not appear willing to take a view in front of Sunday's vote and the volatility is likely to be seen early next week."

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Read:When are the French election results out on Sunday? (http://www.marketwatch.com/story/when-are-the-french-election-results-out-on-sunday-2017-04-20)

And:5 charts show what the French presidential election means for financial markets (http://www.marketwatch.com/story/5-charts-show-what-the-french-presidential-election-means-for-financial-markets-2017-04-21)

For the Easter holiday-shortened week, the London benchmark fell 2.9%, the biggest percentage decline since early November, FactSet data showed. This week, stocks were clipped by the pound's jump above $1.28 after U.K. Prime Minister Theresa May unexpectedly called a snap general election for June 8.

A stronger pound puts pressure on the FTSE 100's multinational companies that make the bulk of their earnings and revenue from overseas markets.

Read:Snap election 'virtually rules out' U.K. staying in EU's single market (http://www.marketwatch.com/story/uk-snap-election-virtually-rules-out-staying-in-eus-single-market-says-morgan-stanley-2017-04-19)

And see:What's a 'snap election' and why does Theresa May want one? (http://www.marketwatch.com/story/whats-a-snap-election-and-why-does-uk-prime-minister-theresa-may-want-one-2017-04-18)

Economic data: The pound fell to $1.2797, and hit an intraday low of $1.2758, after U.K. retail sales rose 1.7% year-over-year in March, according to the Office for National Statistics, confounding expectations for a 3.7% increase (http://www.marketwatch.com/story/uk-retail-sales-fall-sharply-in-march-2017-04-21).

"The story is one of U.K. consumers feeling the squeeze following the impact of the post-referendum falls in the pound on import prices and on prices consumers are now facing on the High Street," Investec economist Victoria Clarke said in a note, adding that inflation is likely to rise to around 3% toward the summer.

"[We] expect this squeeze on consumer spending momentum to contribute to a slowdown in the quarterly pace of growth over the year ahead, starting with next week's Q1 preliminary GDP figures," she said, noting Investec's growth forecast of 0.4%.

The British economy grew 0.7% in the fourth quarter of 2016. The first-quarter growth report is due next Friday.

Movers: Oil producer BP PLC (BP.LN) (BP.LN) fell 1.2% while Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) pared gains to settle 0.1% higher. The moves came as a selloff in oil prices accelerated (http://www.marketwatch.com/story/losses-for-oil-accelerate-on-nymex-with-prices-below-50bbl-2017-04-21), pushing U.S. oil futures below $50 a barrel.

A rally in shares of Rio Tinto PLC (RIO) (RIO) (RIO) fizzled, leaving them lower by 0.3%. They had climbed after a ratings upgrade for the iron ore producer at BNP Paribas. Meanwhile, analysts are questioning whether a recent selloff in iron ore is overdone and are suggesting Rio Tinto shares are worth consideration for buying, Barron's wrote Friday (http://blogs.barrons.com/asiastocks/2017/04/21/iron-ore-selloff-is-overdone-time-to-buy-rio-tinto/).

Rival BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) fell 1%, swinging lower alongside other mining shares. BHP had bulked up earlier after the company said it is embarking on a $204 million expansion of its coking-coal operations in eastern Australia (http://www.marketwatch.com/story/bhp-billiton-plans-204m-expansion-of-coal-mine-2017-04-20).

Metals producer Antofagasta PLC (ANTO.LN) reversed course and ended 0.9% lower, and Glencore PLC (GLEN.LN) shed 0.6%.

Mining stocks make up nearly 7% of the FTSE 100's weighting.

Meanwhile, Reckitt Benckiser Group PLC (RB.LN) (RB.LN) closed down 0.8%, off session lows. The consumer goods company, whose brands include Lysol, posted first-quarter revenue of 2.64 billion pounds (http://www.marketwatch.com/story/reckitt-benckiser-revenue-boosted-by-forex-rates-2017-04-21)($3.31 billion), up 15% considering foreign exchange rates.

But excluding the impact of changes in exchange rates, like-for-like revenue was unchanged. The comparison was the "toughest" for the year, given a rise of 5.2% in the first quarter of 2016, said Liberum analysts in a note.

(END) Dow Jones Newswires

April 21, 2017 13:12 ET (17:12 GMT)