LONDON MARKETS: U.K. Stocks Edge Higher, But Strong Pound Keeps A Cap On Gains

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Inflation data ahead, may hit 2.8%; Whitbread downgraded

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U.K. blue-chip stocks clung to thin gains Tuesday, held in check by a climb in the pound ahead of the release of British inflation data.

The FTSE 100 index was up 0.1% at 7,420.57, led by the basic materials and industrial groups. On Monday, the London benchmark closed up 0.5% (http://www.marketwatch.com/story/ashtead-hurricanes-may-increase-fleet-demand-2017-09-12) after Hurricane Irma wreaked less damage on Florida than anticipated and as fears over North Korea's nuclear ambitions eased.

U.K. and European stocks were tracking Monday's gains on Wall Street, which left the S&P 500 at a record close. That's "bolstering this week's revival of risk appetite on reduced geopolitical and meteorological concerns," said analysts at Accendo Markets.

"Overnight, fresh sanctions on North Korea weren't quite as strong as the U.S. had been looking for, stopping short of a ban on oil imports," they said.

Read:North Korea slapped with tough new sanctions by U.N. Security Council (http://www.marketwatch.com/story/north-korea-slapped-with-tough-new-sanctions-by-un-security-council-2017-09-11)

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Also resolved were concerns that the House of Commons could hold up a bill designed to transpose 10,000 EU laws into U.K. law, which passed its first key hurdle (http://www.marketwatch.com/story/controversial-brexit-bill-passes-first-hurdle-in-parliament-2017-09-11) late Monday.

"U.K. Prime Minister May also survived another Parliamentary vote on her Brexit bill, although not without significant resistance -- from both sides -- and the likelihood of major amendments being attached," the Accendo analysts said.

Critics argue the bill hands too much power to the prime minister and her cabinet -- what has been described as "Henry VIII powers" -- because it allows them to alter laws without parliamentary approval.

Stock movers: Whitbread PLC (WTB.LN) fell 3.3% after Citigroup downgraded its rating to sell from buy, saying it's "cautious on European hotels." Whitbread runs the Premier Inn hotel chain.

Citi also said its analysis points to "just" around four to five years of structural growth left in the branded U.K. coffee market, which includes Whitbread's competitors. Whitbread is behind the Costa Coffee chain.

Home builders are among the decliners, with Taylor Wimpey PLC (TW.LN) losing 3.4% and Persimmon PLC (PSN.LN) down 2.7%.

Ashtead Group PLC (AHT.LN) rose 4.9%, to become the strongest performer on the FTSE 100. The equipment rental company posted a 29% rise in pretax profit and said Hurricanes Harvey and Irma may bolster demand. (http://www.marketwatch.com/story/ashtead-hurricanes-may-increase-fleet-demand-2017-09-12)

Gainers included Associated British Foods PLC (ABF.LN) , with shares up 1.8%, and miner Glencore PLC (GLEN.LN) higher by 1.3%.

Inflation ahead: The pound may be on the move after the release of U.K. inflation data for August. Inflation is expected to rise to 2.8% on year-over-year basis, according to FactSet survey of analysts. Consumer prices are projected to have risen to 0.5% month-over-month.

The Bank of England's inflation target is 2%, and the update will arrive before Thursday's Monetary Policy Committee meeting at the central bank. But BOE policy makers are widely expected to keep interest rates and the quantitative easing program intact.

"Even though a rebound in the CPI rates could support the pound and revive some speculation with regards to a BOE rate hike in the near term, we remain skeptical on that prospect," said Charalambos Pissouros, senior analyst at IronFX, noting that business investment stagnated in the second quarter.

"However, if inflation indeed accelerates today and wages also accelerate tomorrow as anticipated, we would not rule out a slightly more hawkish tone from the BoE when it meets on Thursday," he wrote in a note.

The pound rose to $1.3200, from $1.3160 late Monday in New York, ahead of the inflation figures. The report is due for release at 9:30 a.m. London time, or 4:30 a.m. Eastern Time.

Brexit watch: British Prime Minister Theresa May early Tuesday won a key vote on Brexit legislation in the U.K. parliament (http://www.marketwatch.com/story/controversial-brexit-bill-passes-first-hurdle-in-parliament-2017-09-11). The bill, aimed at transposing more than 10,000 EU laws on to the U.K. statute book, would go into effect on March 29, 2019. That's the day the U.K. is scheduled to leave the EU. Critics argue the bill hands too much power to the prime minister and her cabinet because it allows them to alter laws without parliamentary approval.

(END) Dow Jones Newswires

September 12, 2017 04:21 ET (08:21 GMT)