LONDON MARKETS: FTSE 100 Slips, With Banks Bitten After Fed Rate-hike Debate

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Mining stocks among the notable advancers

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U.K. stocks slipped Thursday, with bank shares and DIY retailer Kingfisher PLC struggling, as investors waited for a reading on how well British consumers fared last month.

The FTSE 100 was off 0.1% at 7,426.03, with financial shares losing the most, while basic material shares put in the strongest performance. The index on Wednesday rose 0.7%. A loss Thursday would be the benchmark's first in four sessions.

The session got underway as traders grappled with the prospect that the Federal Reserve may not raise interest rates again this year (http://www.marketwatch.com/story/some-fed-members-say-bank-can-be-patient-on-interest-rates-due-to-low-inflation-2017-08-16). Minutes from the Fed's meeting in July, released late Wednesday, showed officials engaged in an intense debate about the path of U.S. inflation after a run of unexpectedly low readings.

"The prospects of a December hike, which would be the third in 2017, have taken a further hit," said Richard Perry, market analyst at Hantec Markets, in a note.

"The dollar rally that had been taking hold has subsequently started to reverse again. Markets such as dollar/yen and gold have reacted strongly, whilst it was interesting to see to see equities also stuttering despite the prospect of less stringent tightening from the Fed," he said.

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Rate debate: Bank shares fell on the ramped-up talk about a U.S. hike looking less imminent. Many U.K. banks have operations in the U.S. and higher interest rates can help bolster net interest margin for lenders. Shares of HSBC PLC (HSBA.LN) (HSBA.LN) fell 0.8%, Barclays PLC (BCS) (BCS) was off 0.4% and Lloyds Banking Group PLC (LLOY.LN) (LLOY.LN) shed 0.2%. Standard Chartered PLC (STAN.LN) fell 1.2%.

The dovish debate at the Fed weighed on the U.S. dollar , but that weakness helped lift dollar-denominated prices of commodities, a few of which including copper have been rallying lately.

Shares of precious metals producer Fresnillo PLC (FRES.LN) jumped 3.8% and gold miner Randgold Resources PLC (RRS.LN) picked up 3%. Copper producer Antofagasta PLC (ANTO.LN) moved up 1.4%.

In other developments Thursday, Kingfisher PLC (KGF.LN) fell 3.9% after the home improvement retailer posted a decline in second-quarter comparable sales (http://www.marketwatch.com/story/kingfisher-quarterly-comparable-sales-decline-2017-08-17) in part because of continued weakness in France.

Economic data: U.K. retail sales are expected to rise 0.2% in July on a month-over-month basis when the data are released at 9:30 a.m. local time. Sales year-over-year are expected to rise 1.3%.

The pound bought $1.2887, compared with $1.2891 late Wednesday in New York.

(END) Dow Jones Newswires

August 17, 2017 04:08 ET (08:08 GMT)