LONDON MARKETS: FTSE 100 Pares Gain As Oil Shares Swing Lower

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Pound falls below $1.27

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U.K. stocks pared gains Tuesday as a reversal in oil prices weighed on energy stocks, but blue-chips were bumped out of the red after the head of the Bank of England said he's not inclined to raise interest rates at this time.

The FTSE 100 was up 0.2% at 7,534.58, led by utility and consumer-related shares. But bank shares were mostly lower as BOE Gov. Mark Carney advocated a lower-for-longer scenario in interest rates.

"From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment," said Carney in Tuesday's speech at Mansion House in London.

Meanwhile, Barclays PLC (BCS) (BCS) was down 0.3% after the U.K. Serious Fraud Office charged the bank and four former executives with conspiracy to commit fraud (http://www.marketwatch.com/story/barclays-4-former-top-execs-charged-with-fraud-2017-06-20) in a case related to fundraising in Qatar during the financial crisis.

Basic materials stocks struggled, and oil and gas shares were knocked down as oil prices swung lower by 2% (http://www.marketwatch.com/story/oil-hovers-at-seven-month-low-as-investors-weigh-up-supply-issues-2017-06-20). U.S. oil futures were below $44 a barrel, trading at their lowest this year, as oversupply concerns mounted.

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In London, shares of oil producer Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) declined 1.1% and BP PLC (BP.LN) (BP.LN) lost 0.8%. Weekly supply data from the American Petroleum Institute is due Tuesday after the close of European trade.

Oil and gas stocks have a hefty weighting of roughly 14% on the FTSE 100.

Carney's pause: The FTSE 100 was thrust out of the red early Tuesday, as the pound dropped below $1.27 after Carney talked down prospects of an imminent rate hike (http://www.marketwatch.com/story/boe-chief-carney-too-early-to-lift-interest-rates-2017-06-20) .

The bank's Monetary Policy Committee last week voted 5-3 to hold the key interest rate at a record low 0.25%, an unexpected tally as analysts had expected at the most one policy maker to vote for a rate hike.

Read:This is what elite fund managers are watching closely -- and it's not Trump or Brexit (http://www.marketwatch.com/story/this-is-what-elite-fund-managers-are-watching-closely-and-its-not-trump-or-brexit-2017-06-19)

With interest rates poised to remain lower, bank shares fell. Lloyds Banking Group PLC (LLOY.LN) (LLOY.LN) fell 1.2%, Standard Chartered PLC (STAN.LN) flipped down 0.6% and HSBC PLC (HSBA.LN) (HSBA.LN) shed 0.2%. Royal Bank of Scotland Group PLC (RBS.LN) (RBS.LN) was fractionally lower.

"We continue to judge that on balance the committee will be dissuaded from a rate rise by a continued run of lackluster data, particularly on the consumer front, between now and the August meeting. That 'on hold' view is strengthened knowing that the governor is minded to act cautiously," said Investec economist Victoria Clarke.

A new policy maker, economics professor Silvana Tenreyro, is set to be on the rate-setting board starting next month, the bank said Monday.

"Although we are limited in what we know about Professor Tenreyro's views, recent comments suggests she would be more than wary of the downsides a poor outcome to Brexit negotiations might imply for the U.K. economy," said Clarke.

But the low-rate scenario helped bump up shares of home builders Persimmon PLC (PSN.LN) and Taylor Wimpey PLC (TW.LN) , rising 1.6% and 0.7%, respectively. As the pound fell, consumer-goods heavyweight Unilever PLC (ULVR.LN) (ULVR.LN) rose 1.3% and drug maker AstraZeneca PLC (AZN.LN) (AZN.LN) was 1.2% higher.

A lower value of the pound can help boost revenue made overseas by multinational companies, many of which are listed on the FTSE 100.

Elsewhere on the FTSE 100, Wolseley PLC (WOS.LN) said quarterly sales rose (http://www.marketwatch.com/story/wolseley-quarterly-sales-trading-profit-rise-2017-06-20)and that it was on track to meet full-year expectations. Shares of the plumbing and building supplies company shook off earlier losses and rose 0.3%.

(END) Dow Jones Newswires

June 20, 2017 07:24 ET (11:24 GMT)