LONDON MARKETS: FTSE 100 Steady After Jobs Data, But Trump Concerns Limit Gains

By Carla Mozee, MarketWatch Features Dow Jones Newswires

U.K. completes sale of Lloyds shares; wages adjusted for inflation fall

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U.K. blue-chip stocks wavered Wednesday, even as U.S. equity futures and a broad European index lost ground on concerns about U.S. President Donald Trump's ability to push through reforms investors have been wanting.

Asian stocks also fell after The New York Times reported that Trump in February asked then-Federal Bureau of Investigation Director James Comey to stop his investigation into former National Security Adviser Michael Flynn (http://www.marketwatch.com/story/us-stock-futures-under-pressure-amid-fresh-concerns-over-trump-2017-05-17). The report cited a memo from Comey.

The FTSE 100 index was down less than 1 point at 7,521.50 but has flicked in and out of positive territory after opening down about 0.4%. Tech and financial shares were losing the most, while consumer-related and basic material stocks were higher.

Across the English Channel, the Stoxx Europe 600 index (http://www.marketwatch.com/story/european-stocks-drop-as-trump-worries-rattle-markets-2017-05-17) was down 0.3%. In the U.S., Dow Jones Industrial Average futures (http://www.marketwatch.com/story/us-stock-futures-slide-as-concerns-over-trump-grow-2017-05-17) fell more than 100 points.

"Talks around the FBI and Russia keep the risk appetite limited and the U.S. political agenda on the backstage," said London Capital Group's senior market analyst Ipek Ozkardeskaya, noting the U.S. Dollar Index has fallen back to levels last seen around November's U.S. presidential election.

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Infrastructure and bank shares worldwide have been among those that have gained on the prospect the Trump administration would boost infrastructure spending, push tax cuts and reforms through Congress and relax regulatory rules for the financial sector.

In London, shares of banking heavyweight HSBC PLC (HSBA.LN) (HSBA.LN) fell 0.7% and engineering company Rolls-Royce Holdings PLC (RR.LN) declined 0.7%.

"The [U.S.] government's inability to expand the fiscal policy at the pace promised by Trump automatically reduces the inflation expectations and gives the Fed more time for normalizing its rates and its balance sheet," said Ozkardeskaya.

The pound was buying $1.2932, up from $1.2915 late Tuesday in New York, as the dollar declined.

A weaker dollar helped most dollar-denominated metals prices rise, including gold futures , which picked up 0.7%. In turn, that buoyed most London-listed shares of metals producers. Fresnillo PLC (FRES.LN) climbed 2.4% and Rio Tinto PLC (RIO) (RIO) (RIO) rose 1.1%.

The FTSE 100 on Tuesday finished above 7,500 for the first time (http://www.marketwatch.com/story/ftse-100-clings-onto-record-high-ahead-of-inflation-report-2017-05-16).

Data: The pound held to gains after the release of jobs data from the Office for National Statistics (http://www.marketwatch.com/story/uk-unemployment-hits-4-decade-low-wages-fall-2017-05-17). The U.K. unemployment rate fell to 4.6%. Weekly earnings excluding bonuses rose 2.4% in three months to March, but adjusted for inflation, they declined by 0.2% compared with a year ago. Headline inflation released Tuesday rose to 2.7% in April. (2.7%%20headline%20inflation%20rate%20released%20Tuesday.)

Wage figures are closely watched by the Bank of England. The Monetary Policy Committee last week held the key interest rate at 0.25%.

"Rate hike on the way? The market could be surprised on how early the BOE hikes," wrote Berenberg's senior U.K. economist Kallum Pickering in a note, adding that the central bank doesn't expect the weakness in wage growth to last.

"We expect the first hike in Q1 2018 with a 40% chance the BOE hikes this year, versus somewhat scattered -- depending on the measure - market expectations of a first hike around late-2018/early-2019," he said.

The central bank appears unlikely to raise rates just before the U.K. is expected to leave the European Union around March 2019, he said.

"If the MPC sees an opportunity to raise rates soon, they may take it."

Stock movers: Lloyds Banking Group PLC (LLOY.LN) (LLOY.LN) jumped 2.2%. The lender is back in private ownership after the U.K. government sold its remaining shares in the company (http://www.marketwatch.com/story/lloyds-bank-returns-to-private-ownership-2017-05-17). The government bailed out Lloyds during the financial crisis.

(END) Dow Jones Newswires

May 17, 2017 06:02 ET (10:02 GMT)