LONDON MARKETS: FTSE 100 Logs Small Gain, But Stronger Pound Limits Advance

By Carla Mozee, MarketWatch Features Dow Jones Newswires

British blue-chips latched to small gains Wednesday, but the advance was limited by a rising pound ahead of labor-market data in the wake of a jump in consumer-price inflation.

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The FTSE 100 was up 0.1% at 7,507.67 after opening in the red. The oil and gas, telecom and tech sectors were moving lower, while consumer services, utility and basic material shares rose.

Shares of oil producers BP PLC (BP.LN) (BP.LN) and Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) fell 0.8% and 0.3%, respectively, as oil prices dropped roughly 1%.

The oil group has a weighting of about 14% in the FTSE 100.

Oil prices were under pressure (http://www.marketwatch.com/story/oil-prices-under-pressure-on-worries-data-will-confirm-rising-us-stockpiles-2017-06-14) after the American Petroleum Institute late Tuesday reported an increase in weekly crude inventories. The U.S. government will release its supply report later Wednesday.

Home builders occupied top spots among the index's gainers, with Barratt Developments PLC (BDEV.LN) up 2.4%, Taylor Wimpey PLC (TW.LN) higher by 1.8% and Persimmon PLC (PSN.LN) gaining 1.7%.

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The FTSE 100 on Tuesday turned lower to close down 0.2%, hurt as the pound pushed above the $1.27 handle after inflation in May hit a four-year high at 2.9%, a higher-than-anticipated rate.

The pound continued to rise Wednesday, buying $1.2784 from $1.2754 late Tuesday in New York. A stronger pound can lead the FTSE 100 lower as about 75% of the revenue generated by the index's companies comes from abroad.

Investors will get another snapshot of the British economy on Wednesday. The employment report is due at 9:30 a.m. London time, or 4:30 a.m. Eastern Time, from the Office for National Statistics.

In terms of wages, weekly earnings excluding bonuses are expected to have risen 2% in the three-months to April, and by 2.4% including bonuses.

The inflation report wasn't the only factor aiding the pound's move.

"Given the fact that [U.K. Prime Minister] Theresa May is likely to just about scratch together a government, there is a feeling that we will see a softer approach to Brexit negotiations, which is helping boost the pound," said IG market analyst Joshua Mahony in a late Tuesday note.

"However, as long as the U.K. refuses to allow free movement of labor, it is unlikely we will see anything that resembles a 'soft' Brexit," he said.

May's Conservative Party and Northern Ireland lawmakers were in talks about working together in the House of Commons after the Conservatives lost their majority in parliament in last week's general election.

As well, the dollar was edging down against major rivals before the Federal Reserve releases its policy decision at 7 p.m. London time. The Fed is widely expected to raise interest rates, and investors will look for signals over the outlook of future interest-rate hikes.

(END) Dow Jones Newswires

June 14, 2017 04:05 ET (08:05 GMT)