Utility shares lose ground on Tory price-cap plans
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U.K. stocks rose Tuesday, aided by gains for mining shares, but utility shares were coming under pressure on concerns about the prospect of a cap on consumer prices.
The FTSE 100 index was up 0.2% at 7,318.18, led by the basic materials, oil and gas, and financial groups. The London benchmark on Monday closed up less than 0.1%.
Tuesday's gains come as European and U.S. volatility indexes -- which reflect the level of worry among investors -- decline in the wake of market-friendly Emmanuel Macron's win (http://www.marketwatch.com/story/investors-are-breathing-a-sigh-of-relief-over-france-for-now-2017-05-07) over euroskeptic Marine Le Pen in the French presidential election. The widely watched CBOE Volatility Index on Monday hit its lowest level in 24 years (http://www.marketwatch.com/story/is-this-the-day-wall-streets-fear-gauge-hits-rock-bottom-2017-05-08).
Read:Why are markets ignoring the black swans? asks Noriel Roubini (http://www.marketwatch.com/story/why-are-markets-ignoring-geopolitical-risks-2017-05-08)
"While this could be interpreted to mean that good times lie ahead, it also indicates that the party may be over soon," said Hussein Sayed, FXTM chief market strategist, in a note.
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"Volatility does not stay at low levels for prolonged periods of time," he said. "Just don't let the extremely quiet market conditions trap you into taking huge risks."
Miners on top: Mining shares were dominating the top of the FTSE 100, after slumping in recent sessions as metals prices were pulled lower by concerns about demand from China.
Glencore PLC (GLEN.LN) shares climbed 3.2% after the commodities producer and trader reversed plans to close an Australian coal mine (http://www.marketwatch.com/story/glencore-seeks-buyer-for-tahmoor-coal-mine-2017-05-09), putting it up for sale instead in a bid to benefit from the recovery in coal prices.
In the group, Anglo American PLC (AAL.LN) shares were up 2.1%, iron ore producer BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) added 1.9%, and Antofagasta PLC (ANTO.LN) moved higher by 1.9%.
Zapped energy: On the downside, utility shares struggled after Prime Minister Theresa May vowed to "end the injustice" of "rip-off energy prices" in an article in The Sun newspaper (https://www.thesun.co.uk/news/3512895/theresa-may-energy-cap-promise/). The Conservative Party's manifesto, scheduled for release Tuesday, is expected to include plans to cap standard variable tariffs.
Shares of British Gas parent Centrica PLC (CNA.LN) fell 3.5%, SSE PLC (SSE.LN) shed 1.5%, and National Grid PLC (NG.LN) lost 0.5%.
"The move to cap prices would be a massive hit to the industry. It might cost Centrica [about] GBP200 million and make it much tougher for the firm to reintroduce its progressive dividend policy," said Neil Wilson, senior market analyst at ETX Capital.
"Like other providers it relies heavily on these standard variable rate tariffs -- about three-quarters of customers are on these lucrative contracts," he said in a note.
Stock movers: Micro Focus International PLC (MCRO.LN) sank 11% after the software company said it's disappointed with declining revenue (http://www.marketwatch.com/story/micro-focus-disappointed-by-hpes-falling-revenue-2017-05-09) at the Hewlett Packard Enterprise Co. (HPE) business it's buying.
The pound was buying $1.2957, down from $1.2941 late Monday in New York.
(END) Dow Jones Newswires
May 09, 2017 04:37 ET (08:37 GMT)