EUROPE MARKETS: European Stocks Book Losses, Led Lower By U.K. Equities As Pound Leaps

By Sara Sjolin and Victor Reklaitis, MarketWatch Features Dow Jones Newswires

Investors largely shake off North Korea jitters

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European stocks finished with modest losses Friday, led by a sharp drop in U.K. stocks that followed signs that the Bank of England is getting ready to hike interest rates soon.

The Stoxx Europe 600 index ended 0.3% lower at 380.71, after closing at its highest level since Aug. 8 on Thursday. It fell as the U.K.'s blue-chip FTSE 100 index significantly underperformed other national benchmarks, sliding 1.1% to 7,215.47 and suffering the lowest close since late April.

The losses in London came as the pound rallied to an intraday high of $1.3617, its highest dollar level since the U.K.'s Brexit vote in June last year. Sterling strengthened after BOE super-dove Gertjan Vlieghe turned hawkish, saying rates may need to go up in "coming months."

"Until recently, I thought the appropriate response of monetary policy was to be patient, given modest growth and subdued underlying inflationary pressure. But the evolution of the data is increasingly suggesting that we are approaching the moment when bank rate may need to rise," he said in a speech (http://www.marketwatch.com/story/boe-dove-vlieghe-now-sees-need-for-rate-hike-2017-09-15). The pound was recently at $1.3577.

His comments echoed the hawkish tone in the BOE meeting minutes released Thursday. The bank's Monetary Policy Committee signaled the time is coming to tighten policy to control inflation.

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"Vlieghe's shift from a dove to a hawk suggests that the majority opinion on MPC may be tilting towards tightening before the year-end," said Boris Schlossberg, managing director of FX Strategy at BK Asset Management.

"The break above $1.3500 indicates that cable may be in a new bullish uptrend, with flows driven by interest-rate expectations rather than concerns about Brexit," he said in a note.

Other indexes: Germany's DAX 30 index finished 0.2% lower at 12,518.81, while France's CAC 40 index fell 0.2% to 5,213.91.

The euro rose to $1.1957, up from $1.1920 late Thursday in New York. The shared currency got support from data showing eurozone wages have risen (http://www.marketwatch.com/story/eurozone-wage-growth-hits-2-year-high-2017-09-15) at the fastest pace in more than two years.

Weekly gain: For the week, the Stoxx 600 scored a 1.4% advance. The pan-European benchmark rallied at the beginning of the week as geopolitical jitters receded and the damage from Hurricane Irma was seen as less severe than expected.

However, on Friday, concerns over North Korea resurfaced, after the isolated nation fired a missile across northern Japan for the second time in a month. The launch came just a day after Pyongyang said it wanted to sink Japan with a nuclear weapon (http://www.marketwatch.com/story/north-korea-threatens-to-reduce-the-us-to-ashes-and-darkness-2017-09-14) and pledged to reduce the U.S. to "ashes and darkness."

"The market response has been thus far rather muted. Either because we've got used to the threats, expected it after recent sanctions led to more aggressive rhetoric, or because Pyongyang kept it local (another intermediate range rather than intercontinental), annoying Japan but not quite goading the West," said analysts at Accendo Markets in a note.

U.S. stocks initially looked on track for a drop after the missile launch, but looked set to end at records (http://www.marketwatch.com/story/dow-futures-steady-paring-losses-that-came-after-latest-north-korean-missile-2017-09-15).

Stock movers: Shares in Carnival PLC (CCL.LN) closed 6.2% lower for the Stoxx Europe 600's biggest loss. Credit Suisse downgraded the cruise operator's stock to neutral from outperform, saying geopolitics and hurricane fallout could weigh on demand.

Shares in H&M Hennes & Mauritz AB (HM-B.SK) climbed 1.7% after the Swedish clothing retailer said fiscal third-quarter sales rose 5%, boosted by a "significantly larger summer sale this year."

ABN AMRO Group NV (ABN.AE) lost 0.7% after the Dutch government reduced its stake in the bank to 56% from 63% (http://www.marketwatch.com/story/dutch-government-cuts-its-abn-amro-stake-2017-09-15). The Dutch government nationalized ABN AMRO in 2008 in the wake of the global financial crisis.

Shares in J.D. Wetherspoon PLC (JDW.LN) soared 14% after the U.K. pub operator reported a rise in profit (http://www.marketwatch.com/story/wetherspoon-profit-rises-maintains-dividend-2017-09-15) and maintained its full-year dividend.

(END) Dow Jones Newswires

September 15, 2017 12:16 ET (16:16 GMT)