LONDON MARKETS: FTSE 100 Drops As U.S. Dollar's Slide Boosts Pound

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Update on U.K. inflation ahead

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U.K. stocks fell Tuesday, as renewed doubts over President Donald Trump's ability to push through his agenda prompted a slide in the dollar and a corresponding jump in the British pound.

The FTSE 100 index declined 0.5% to 7,369.83, hurt by losses across all sectors.

The moves came as the pound hit an intraday high of $1.3107, driven by a broad fall in the U.S. dollar to levels not seen since September 2016. A stronger pound can weigh on the FTSE 100, as it affects the many large multinational companies on the London index that generate revenue and earnings in overseas markets.

The greenback was under pressure after Republican leaders in the U.S. Senate late Monday ditched their bill to repeal and simultaneously replace (http://www.marketwatch.com/story/health-care-overhaul-seems-sunk-as-two-more-republicans-oppose-senate-bill-2017-07-17) much of the Affordable Care Act, or "Obamacare," after it became clear it wouldn't have enough votes to pass.

First Take:Could GOP health-care bill's implosion actually lead to a bipartisan solution? (http://www.marketwatch.com/story/could-gop-health-care-bills-implosion-lead-to-bipartisan-solution-2017-07-17)

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"This implies that [U.S. President Donald] Trump's tax reform agenda may be now more difficult to implement and may take longer to arrive, as the cuts in health care were expected to finance some of the promised fiscal measures," said Charalambos Pissouros, senior analyst at IronFX, in a note.

U.K. equities were driven higher after Trump's election in November, on the prospect that lower corporate taxes, higher fiscal spending and a pickup in inflation in the U.S. would benefit banks, construction companies and others.

Metals in focus: But the decline in the dollar failed to bolster prices for metals, which are denominated in the U.S. currency. In turn, shares of mining companies lost ground. Iron ore producer BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) fell 1.6%, and diversified miner Anglo American PLC (AAL.LN) lost 1.7%.

Rio Tinto PLC (RIO) (RIO) (RIO) shares were down 1.7%. On Tuesday, the mining company lowered its export guidance for iron ore (http://www.marketwatch.com/story/rio-tinto-reduces-iron-ore-export-forecast-2017-07-17) on weather and maintenance disruption.

But precious metals miners Fresnillo PLC (FRES.LN) and Randgold Resources PLC (RRS.LN) picked up 0.1% each.

Inflation data ahead: The pound, which has recently been trading at around 10-month highs, will remain in focus with the release of June consumer-price inflation data at 9:30 a.m. London time, or 4:30 a.m. Eastern Time, from the U.K.'s Office for National Statistics.

The rate may hold steady at 2.9%, already at its highest in four years and well-above the Bank of England's inflation target of 2%. A further increase in the inflation rate may continue to fuel talk about if policy makers may decide to raise the benchmark interest rate from a record low of 0.25%.

(END) Dow Jones Newswires

July 18, 2017 04:28 ET (08:28 GMT)