Utility shares lose ground on Tory price-cap plans
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U.K. stocks rose Tuesday, lifted by gains for mining shares, but utility shares came under pressure on concerns about the prospect of a cap on consumer prices.
The FTSE 100 index ended up 0.6% at 7,342.21, marking a fourth straight day of gains.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--declined 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 on Sunday. The widely watched CBOE Volatility Index on Monday hit its lowest level in more than 23 years (http://www.marketwatch.com/story/is-this-the-day-wall-streets-fear-gauge-hits-rock-bottom-2017-05-08).
The Euro Stoxx 50 Volatility Index reached its lowest since March on Monday, and was down 2.1% at 14.09 on Tuesday, according to FactSet, while the Euronext FTSE 100 Volatility Index dropped 4.9% to 10.21 on Tuesday.
Read:Why are markets ignoring the black swans? asks Nouriel Roubini (http://www.marketwatch.com/story/why-are-markets-ignoring-geopolitical-risks-2017-05-08)
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"The calming of political nerves saw stocks gain ground as volatility crumbled by the wayside," wrote Jasper Lawler, senior market analyst at London Capital Group. However, the "prevalence of volatility [exchange-traded products] in combination with very accommodative central bank policy have been a death knell to volatility," he said.
"Every time volatility does jump, it's sold back down by traders confident central banks will be there to save them from a prolonged market panic," Lawler said. "The current extreme low readings in volatility suggest the next selloff could come as early as this quarter. If the recent slide in commodity prices picks up steam it could spread to stocks as the next source of volatility."
Read:This extremely quiet market could be setting a trap for investors (http://www.marketwatch.com/story/this-extremely-quiet-market-could-be-setting-a-trap-for-investors-2017-05-09)
Also:As VIX hits multidecade low, investors retreat from volatility products (http://www.marketwatch.com/story/this-extremely-quiet-market-could-be-setting-a-trap-for-investors-2017-05-09)
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.
Read:Goldman says these 3 things threaten its upbeat outlook on commodities (http://www.marketwatch.com/story/goldman-says-these-3-things-threaten-its-upbeat-outlook-on-commodities-2017-05-09)
Glencore PLC (GLEN.LN) (GLEN.LN) shares climbed 2.3% 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.
Also in the group, Anglo American PLC (AAL.LN) shares gained 1.1%, iron ore producer BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) added 2.2%, and Antofagasta PLC (ANTO.LN) moved higher by 1%.
Sapped 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 1.2% and SSE PLC (SSE.LN) shed 1.2%.
"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 5.7% 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 $1.2939, down from $1.2941 late Monday in New York.
(END) Dow Jones Newswires
May 09, 2017 12:10 ET (16:10 GMT)