LONDON MARKETS: FTSE 100 Clings Onto Record High Ahead Of Inflation Report

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Vodafone and oil shares rise

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U.K. stocks edged up Tuesday, hovering around a record high as Vodafone Group PLC and oil shares rose.

Investors are watching for the release of a report expected to show British inflation hitting its highest level in more than three years.

The FTSE 100 index was 0.2% at 7,467.91 as the consumer goods and energy groups advanced. But the tech, utility and industrial sectors lagged.

The London benchmark on Monday closed at a record high of 7,454.37 (http://www.marketwatch.com/story/oil-mining-shares-lead-ftse-100-toward-another-record-high-2017-05-15), bolstered by gains for commodity shares.

On Tuesday, shares in oil producers BP PLC (BP.LN) (BP.LN) and Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) were up 0.3% and 0.5%, respectively, adding to their advances on Monday. Those gains came as crude oil prices surged to two-week highs after energy ministers from Saudi Arabia and Russia said they backed a nine-month extension of OPEC-led production cuts (http://www.marketwatch.com/story/oil-prices-add-to-gains-with-investors-cheered-by-opec-news-2017-05-16). Oil prices continued to rise modestly on Tuesday.

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Inflation reading: A report on inflation in April due later is expected to show a rise to an annual rate of 2.5%, according to a FactSet consensus of view. That level would be the highest since September 2013. Inflation is currently running above the Bank of England's 2% target, and the bank's policy makers foresee the rate reaching just below 3% in the fourth quarter.

"We know from the Bank of England meeting that inflation has been on the rise, but the increase was driven 'entirely' by the weak currency so if the data is strong, investors could still fade an initial pop," in the pound, said Kathy Lien, managing director of FX strategy at BK Asset Management, in a late Monday note.

"With that in mind, the employment and consumer spending reports later this week could have a more lasting impact on the currency. $1.3000 is the level to watch -- if that breaks we should see a stronger move to $1.32," she added.

The pound traded at $1.2925, up from $1.2895 late Monday in New York, before the April inflation data.

"The big picture is that underlying inflationary pressures continue to build in the U.K. economy as the impact of weaker sterling and higher energy prices now feeds into consumer prices," wrote Davy Research analyst David McNamara. "With nominal wages now growing at just 2%, the squeeze on household incomes is set to worsen, weighing on consumer spending."

The report from the Office for National Statistics is scheduled for release at 9:30 a.m. London time, or 4:30 a.m. Eastern Time.

Movers: Vodafone shares (VOD.LN) climbed 3.6% after the telecom company forecast profit growth (http://www.marketwatch.com/story/vodafone-forecasts-stronger-profit-growth-2017-05-16-3485299) in the current year after hitting its organic growth target for fiscal 2017. Vodafone also raised its final dividend by 2% but posted an annual loss of 6.1 billion euros.

EasyJet PLC shares (EZJ.LN) dropped 5.2% after the budget carrier's six-month net loss widened to 192 million pounds (http://www.marketwatch.com/story/easyjet-loss-deepens-as-brexit-hit-pound-bites-2017-05-16) ($248 million). The airlines said weakness in sterling against the dollar and euro shaved GBP82 million off the bottom line.

(END) Dow Jones Newswires

May 16, 2017 04:09 ET (08:09 GMT)