LONDON MARKETS: FTSE 100 Rallies To Intraday Highs As Yellen Backs Gradual Pace Of Rate Hikes

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Burberry brightens; U.K. unemployment rate at lowest in 42 years

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U.K. stocks on Wednesday surged by the most since April after Federal Reserve Chairwoman Janet Yellen suggested the bank's rate-hike cycle doesn't have long to go before coming to an end.

A gain for luxury-goods maker Burberry Group PLC also contributed to the push higher on the FTSE 100.

The London benchmark climbed 1.3% to 7,425.86, the biggest percentage gain since April 24. It was also cruising to its highest close since June 27, FactSet data show, as only the tech group lagged behind all other sectors.

Blue-chips soared alongside stocks on Wall Street (http://www.marketwatch.com/story/us-stock-futures-in-holding-pattern-as-traders-wait-for-yellen-2017-07-12) after the release of prepared text from Yellen's testimony before lawmakers on Capitol Hill.

In it, she said interest rate increases will be gradual and that "the federal-funds rate would not have to rise all that much further to get to a neutral policy stance."

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Equity market investors in the U.K. and Europe appeared to embrace her view that borrowing costs for companies and consumers may not need to step much higher. European stocks jumped, with the Stoxx 600 rising 1.6% (http://www.marketwatch.com/story/european-stocks-rise-lifted-by-oil-firms-and-burberry-2017-07-12). The Dow Jones Industrial Average leapt to a record intraday high.

Watch MarketWatch's live blog and video of Yellen's testimony before House panel (http://blogs.marketwatch.com/capitolreport/2017/07/12/live-blog-and-video-of-yellens-testimony-before-house-panel/)

Yellen will testify before the Senate Banking Committee on Thursday.

Stock movers: Burberry shares (BRBY.LN) (BRBY.LN) climbed 3.2% after the high-end apparel and accessories maker said it's on track to reach its cost savings targets and that first-quarter comparable sales and underlying revenue climbed (http://www.marketwatch.com/story/burberrys-comparable-sales-lifted-by-china-2017-07-12-24853839). Retail revenue on an underlying basis rose 3% to GBP478 million.

Oil and gas shares, which have a weighting of about 14% on the FTSE 100, gained ground as oil prices rallied more than 2% (http://www.marketwatch.com/story/oil-extends-gains-after-upbeat-us-production-data-2017-07-12) after of a weekly supply report from the U.S. Energy Information Administration showed 7.6 million barrels draw in stockpiles last week.

Shares of oil heavyweight BP PLC (BP.LN) (BP.LN) picked up 2.2% and Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) moved up 2%.

Read:Buying these commodity stocks looks like a home run (http://www.marketwatch.com/story/news-from-the-north-buying-these-commodity-stocks-looks-like-a-home-run-2017-07-12)

Barratt Developments PLC (BDEV.LN) shares were up 0.4% in topsy-turvy trade that had seen the shares fall after rising as much as 2.2%. The home builder said fiscal 2017 pretax profit is expected to rise to a more-than-expected GBP765 million (http://www.marketwatch.com/story/barratt-foresees-pretax-profit-above-expectations-2017-07-12) as it sold more expensive homes.

Micro Focus International PLC (MCRO.LN) slid 6.2%. "Despite cost reductions in Micro Focus which enabled margins to remains at c.50%, absolute profits were modestly below our expectations due to sales weakness," said Investec in a research note about the software company's financial update (http://www.marketwatch.com/story/micro-focus-adjusted-profit-rises-2017-07-12).

Kingfisher PLC (KGF.LN) fell 2.2%. UBS downgraded its rating on the DIY retailer to sell from hold, as well as its price target, according to Dow Jones Newswires.

Sterling: London blue-chip shares remained higher even as the pound marched to intraday highs following the U.K. government's latest jobs report (http://www.marketwatch.com/story/uk-unemployment-rate-hits-lowest-since-1975-2017-07-12). A stronger pound can hurt shares of multinationals on the FTSE 100 as those companies make the bulk of their revenue and earnings in overseas markets.

The unemployment rate fell to 4.5% in the March-May period, the lowest since 1975. Weekly wages excluding bonuses rose by a more-than-expected 2%, but wages adjusted for inflation declined.

The pound hit an intraday high of $1.2908 after the jobs report. It fetched $1.2845 late Tuesday in New York.

Sterling is "looking perkier than it has done in recent days, as the market chooses the hard economic data over an interview with BOE Deputy Governor Ben Broadbent, who said he is not ready to hike rates yet," said Kathleen Brooks, City Index's research director, wrote.

See:U.K. sovereign rating at risk of downgrade if Brexit talks go badly (http://www.marketwatch.com/story/uk-sovereign-rating-at-risk-of-downgrade-if-brexit-talks-go-badly-2017-07-11)

The pound fell as low as $1.2811 after Broadbent said uncertainties surrounding the outlook for the British economy makes it a difficult time to support an increase in borrowing rates.

"In my opinion, it is a bit tricky at the moment to make a decision (to raise rates)," Broadbent told Scotland's The Press and Journal newspaper in an interview published Wednesday (http://www.marketwatch.com/story/boes-broadbent-not-ready-to-vote-for-a-rate-hike-2017-07-12). "I am not ready to do it yet."

The pound traded around eight-month lows against the euro .

(END) Dow Jones Newswires

July 12, 2017 10:38 ET (14:38 GMT)