EUROPE MARKETS: FTSE 100 Advances But Tesco Shares Lose Grip On Sales-spurred Gain

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Blue-chips index still on course for weekly fall

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U.K. stocks on Friday were on track to break a losing streak, helped by advances for oil and gas shares, but the benchmark FTSE 100 was still on course for a weekly decline.

The FTSE 100 rose 0.7% to 7,470,88, with all sectors rising. The oil and gas, industrial and consumer goods groups were the best performing.

The energy group, which has a roughly 14% weighting on the benchmark, rose as oil prices gained ground, including a 1% rise for Brent crude futures . Shares of oil companies BP PLC (BP.LN) (BP.LN) and Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) each picked up 1.2%.

A win Friday would be the first for the FTSE 100 after four sessions of declines. Still, the FTSE 100 was on track to fall 0.9% for the week, which would be the largest since the week ended April 21.

Meanwhile, the more domestically focused FTSE 250 index moved up 0.9%.

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"Traders have gotten to grips with the surprise that three members of the Bank of England voted to hike interest rates. Bargain hunting is in play today as dealers pick up cheap stocks," wrote David Madden, a CMC Markets analyst.

The FTSE 100 on Thursday closed 0.7% lower (http://www.marketwatch.com/story/ftse-100-drops-as-skepticism-over-fed-outlook-hits-risk-assets-2017-06-15), and the FTSE 250 dropped 2.1%, rattled as retail sales in May fell 1.2%, highlighting concerns about consumer spending as wages fall. As well, stocks finished lower after the Bank of England unexpectedly voted by 5-3 to hold its key interest rate at 0.25%. Analysts had widely expected one policy maker -- at the most -- to vote for a rate increase.

"Bank of England Governor Mark Carney previously articulated that it would look through higher inflation readings in the short-term as there were risks that the economy would weaken from here, with particular threats to the U.K. consumer," wrote Dermot O'Leary, chief economist at Goodbody on Friday.

"We believe those threats are very real and will manifest themselves over the coming months, thus giving the Bank of England reason to keep rates on hold at the current level for a prolonged period," he said.

Retailers: Some uneasiness remained within retail shares Friday, with Tesco PLC (TSCO.LN) turning lower after rising more than 4% after trading opened. Britain's largest supermarket chain said first-quarter same-store sales at its core U.K. unit grew by 2.3%, (http://www.marketwatch.com/story/tescos-uk-sales-rise-23-on-food-boost-2017-06-16) and that it's working with suppliers to offset the impact of inflation.

"[I]nvestors do not appear to have found any strong reasons to upgrade 2017/18 profit expectations from the current widely forecast [around] GBP1.5 billion," said Ken Odeluga, market analyst at City Index, in a note.

"Residual concerns about profit growth, quite fairly, remain. Price remains the only game in town right now, and it's one Tesco has lost before, when the ongoing battle between established grocers and Aldi and Lidl contorted big grocers into deeply unhealthy shapes."

Shares of rival supermarket chain J Sainsbury PLC (SBRY.LN) also flipped lower, losing 0.2%. Wm. Morrison Supermarkets PLC (MRW.LN) pared its rise to 0.8%.

This week, data from the Office for National Statistics showed consumer-price inflation rising to a four-year high at 2.9%.

That helped push the pound above $1.27 this week. It was trading slightly higher on Friday, buying $1.2769 compared with $1.2756 late Thursday in New York.

A stronger pound, however, can pressure shares of multinational companies on the FTSE 100 as they make most of their revenue in overseas markets.

Weekly wrap up: In other moves Friday, Rolls-Royce Holdings PLC (RR.LN) was up 1.7% after the aircraft engine maker kept its underlying outlook (http://www.marketwatch.com/story/rolls-royce-holds-to-outlook-excluding-fx-effects-2017-06-16) for its half-year and full-year revenue, profit and free cash flow unchanged.

On the downside, telecom company BT Group PLC (BT.A.LN) fell 1.2% and miner Anglo American PLC (AAL.LN) lost 3%.

Meanwhile, U.K. Prime Minister Theresa May and her Conservative Party were still reportedly discussing a deal for support from Northern Ireland lawmakers after the Conservatives lost their parliamentary majority in last week's general election.

"The political situation in the U.K. seems to be improving, as the Queen's speech will take place on Wednesday, even if the Conservatives don't have a deal in place with the Democratic Unionist Party by then. This sign of political stability has added to the boost in investor confidence," CMC's Madden said Friday.

Brexit talks are set to begin Monday between U.K. and European Union officials.

(END) Dow Jones Newswires

June 16, 2017 08:41 ET (12:41 GMT)