LONDON MARKETS: FTSE 100 Struggles As Pound Clings To Multiweek High

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Financials make mixed showing as investors grapple with BOE hints of pullback on easing

Continue Reading Below

U.K. stocks fell Friday, on track to deepen losses for the month, as the pound traded at a six-week high on the prospect of higher interest rates.

The FTSE 100 lost 0.3% to 7,328.69, with only the consumer goods and industrials sectors showing slight gains. The oil and gas, health care and telecom groups led the decliners. On Thursday, the London benchmark shed 0.5% (http://www.marketwatch.com/story/miners-help-lift-ftse-100-even-as-pound-extends-gains-2017-06-29) after giving up earlier gains.

For the week, the blue-chip index was on course for a loss of 1.3%, putting it in line for a June fall of 2.6%. The benchmark is facing a rise of only 0.1% for the second quarter.

On Friday, equities were trading for a second session with the pound above $1.30, buying $1.3015. That was up from $1.3009 late Thursday, the highest New York settlement for sterling since May 19.

The FTSE 100 is sensitive to pound moves, as a stronger value of sterling can hurt revenue and cut into earnings made overseas by multinational companies on the index.

Continue Reading Below

BOE fallout: The pound's gain came in part after Bank of England Gov. Mark Carney this week hinted at an interest-rate increase (http://www.marketwatch.com/story/boe-chief-carney-hints-at-rate-rise-2017-06-28).

Shares in banks, which benefit from higher interest rates, were mixed Friday. HSBC Holdings PLC (HSBA.LN) shares added 0.3%, as did those of Barclays PLC (BCS) . Standard Chartered PLC (STAN.LN) was 0.2% higher.

But Royal Bank of Scotland Group PLC (RBS.LN) shares shed 0.2%, and Lloyds Banking Group (LLOY.LN) gave up 0.4%.

The signals coming out of the BOE have prompted UBS to drop its forecast for further monetary easing in the U.K.

"This change of call is entirely a response to the recent change in tone of several [Monetary Policy Committee] members, and in no way a sign that our expectations for the U.K. economy have improved," wrote UBS strategist John Wraith in a Thursday note.

"On the contrary, we are increasingly convinced the slowdown seen in Q1 2017 is set to persist and probably intensify over the period to the U.K.'s EU exit at the end of Q1 2019," he said.

Read:Central banks set up investors for a long, hard road back to 'normal' (http://www.marketwatch.com/story/investors-face-a-long-hard-road-back-to-normal-2017-06-29)

And see:Here's why the stock market is spooked by central bankers (http://www.marketwatch.com/story/heres-why-the-stock-market-is-spooked-by-central-bankers-trump-agenda-delays-2017-06-29)

Stock movers: Advancers were led by British Airways parent International Consolidated Airlines Group SA (IAG.LN) and easyJet PLC (EZJ.LN) , as the airlines' shares gained 2.1% and 1.5%, respectively. British Airways' cabin crew is set to begin a 16-day strike on Saturday.

Among decliners, United Utilities Group PLC (UU.LN) fell 1.9% and oil producer BP (BP.LN) gave up 1.6%.

Economic data: On Friday, the final reading of first-quarter U.K. gross domestic product is due at 9:30 a.m. London time, or 4:30 a.m. Eastern Time. The growth estimate in May was revised down to 0.2%. (http://www.marketwatch.com/story/uk-first-quarter-gdp-growth-revised-down-to-02-2017-05-25)

(http://www.marketwatch.com/story/uk-first-quarter-gdp-growth-revised-down-to-02-2017-05-25)At the same time, a reading on services activity in April is due.

Confidence among U.K. consumers soured significantly (http://www.marketwatch.com/story/uk-consumer-confidence-sours-in-june-2017-06-30)in June, a GfK survey published Friday showed, on growing concerns about the economy and their own financial situation.

(END) Dow Jones Newswires

June 30, 2017 04:15 ET (08:15 GMT)