April retail sales crush forecasts; Shire rallies on test results
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U.K. blue-chips dropped sharply Thursday, with a pop in the pound above $1.30 for the first time in seven months accelerating an ongoing selloff prompted by troubles surrounding U.S. President Donald Trump's administration.
The FTSE 100 index fell 1% to 7,426.12, with only the utility and health care sectors posting modest gains. The index was facing its deepest percentage loss since April 18.
The FTSE 100 lost as much as 1.5% as the pound climbed to $1.3048 after U.K. retail sales for April blew past expectations. A stronger pound puts pressure on foreign-denominated earnings made by multinational companies listed on the London benchmark.
The FTSE 100 on Wednesday fell 0.3% (http://www.marketwatch.com/story/ftse-100-steady-ahead-of-jobs-data-but-trump-worries-limit-gains-2017-05-17), the first loss in 10 sessions and a retreat from its record close of 7,522.03 logged Tuesday (http://www.marketwatch.com/story/ftse-100-clings-onto-record-high-ahead-of-inflation-report-2017-05-16).
Trump's tribulations: European stocks slumped 1% on Thursday, and U.S. stock futures flipped lower (http://www.marketwatch.com/story/fragile-start-ahead-for-us-stocks-as-political-concerns-weigh-heavy-2017-05-18), with futures for the Dow Jones Industrial Average down nearly about 100 points. The Dow industrials on Wednesday (http://www.marketwatch.com/story/us-stock-futures-slide-as-concerns-over-trump-grow-2017-05-17) tumbled 372.82 points.
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The tumble in equities followed a New York Times report (https://www.nytimes.com/2017/05/16/us/politics/james-comey-trump-flynn-russia-investigation.html?_r=0) that Trump in February asked then-director of the Federal Bureau of Investigation, James Comey, to stop his investigation into links between Trump's associates and Russian officials.
Read:Trump campaign had at least 18 undisclosed contacts with Russia: report (http://www.marketwatch.com/story/trump-campaign-had-at-least-18-undisclosed-contacts-with-russia-report-2017-05-18)
"Realistic discussions of impeachment are now being had and markets are rightly concerned that this is another significant spanner in the works for Trump's legislative plans," said Richard Perry, market analyst at Hantec Markets, in a not. "If he struggled with health care reform how is he going to get through controversial plans over huge fiscal stimulus, banking reform and deregulation?"
Banks shares worldwide had booked gains on the prospect of looser regulatory rules for the financial industry. A slide in shares of financial companies on Wednesday led Wall Street's decline, leaving Bank of America Corp. (BAC) slumping 6%.
In London, shares of Barclays PLC (BCS) stumbled 1.9% and HSBC Holdings PLC (HSBA.LN) (HSBA.LN) drooped 1.4%.
Questions also arose about the feasibility of infrastructure plans touted by Trump and the continuation of an accompanying reflation trade. That hurt shares of metals producers, with Antofagasta PLC (ANTO.LN) off 3.7% and Anglo American PLC (AAL.LN) down 2.9%.
But there's "a potential calming impact with the appointment of former FBI Director Robert Mueller as a special counsel for the Russia investigation," said Perry. "Global equities are still under pressure, but are they set for a bounce too as the bargain hunters move in?"
See: Robert Mueller, ex-FBI director, named special counsel for Russia probe (http://www.marketwatch.com/story/robert-mueller-ex-fbi-director-named-special-counsel-for-russia-probe-2017-05-17)
Pound and data: The pound leapt above the $1.30 level for the first time since early October, according to FactSet data. It fetched $1.2971 late Wednesday in New York.
The advance came after the Office for National Statistics said April retail sales rose 2.3% (http://www.marketwatch.com/story/uk-retail-sales-rebound-overshoot-expectations-2017-05-18), well above the FactSet consensus estimate of 1.2%. "Anecdotal evidence from retailers suggests that good weather contributed to growth," the ONS said.
Year-over-year, sales climbed 4%, outstripping expectations of 2% increase.
The report "will surely give some respite to the Bank of England and its policy makers. Although the U.K.consumers have started to feel the effects of high Inflation and a slower wage growth over the first quarter of 2017, consumer confidence looks to have turned a corner for April," wrote Anthony Kurukgy, sales trader at Foenix Partners.
"The question of how sustainable these figures will look in the months to come in the face of accelerated Inflation should keep policy makers grounded," he added.
The Bank of England last week held the key interest rate at 0.25%. This week, data has shown regular wages rose 2.1% in the three months to March. But adjusted for inflation, they fell 0.2%. Meanwhile, headline inflation has climbed to 2.7%.
Stock movers: Shire PLC (SHPG) (SHPG) surged 5.5% after the company reported positive results from a late-stage trial (http://www.marketwatch.com/story/shire-adrs-jump-almost-7-premarket-after-positive-trial-of-angioedema-treatment-2017-05-18) of a treatment for hereditary angioedema, a rare genetic disease that causes swelling of the extremities, gastrointestinal tract and upper airways.
Burberry Group PLC (BRBY.LN) rose 2.2% as the luxury-goods retailer said it was on target with its cost-savings program (http://www.marketwatch.com/story/burberry-pretax-profit-below-forecasts-2017-05-18) and backed its current-year forecasts. Full-year profit fell 5%, below its previous guidance. Burberry also said it'll buy back an additional GBP300 million (http://www.marketwatch.com/story/burberry-to-buy-back-up-to-gbp300-mln-of-shares-2017-05-18) ($388.2 million) of shares.
Royal Mail PLC (RMG.LN) climbed 1.8% as the company posted a 25% rise in fiscal 2017 pretax profit. (http://www.marketwatch.com/story/royal-mail-pretax-profit-rises-25-2017-05-18)
Experian PLC shares (EXPN.LN) fell 3.1% even as the financial data and services provider posted an 11% rise in 2017 pretax profit (http://www.marketwatch.com/story/experian-plans-600-million-share-buyback-2017-05-18). Experian said it's planning to buy back $600 million worth of shares. UBS said that is below its estimate of a $700 million buyback plan.
(END) Dow Jones Newswires
May 18, 2017 07:49 ET (11:49 GMT)