LONDON MARKETS: FTSE 100 Gets A Lift From Supermarket Stocks, Softer Pound

By Carla Mozee, MarketWatch Features Dow Jones Newswires

U.K. stocks rose Tuesday, aided by gains for supermarket shares and a pullback from around 15-month highs in the pound against the U.S. dollar.

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The FTSE 100 index rose 0.2% to 7,271.27, led by oil and gas and industrial shares. But consumer goods and basic material shares declined. The index on Monday rose 0.5% (http://www.marketwatch.com/story/ftse-100-reaches-for-first-gain-in-5-sessions-as-geopolitical-tensions-ease-2017-09-18), breaking a four-session losing streak.

Investors will turn their attention to the U.S. Federal Reserve, which begins its two-day policy meeting on Tuesday. The Fed is widely expected on Wednesday to say it will start reducing its $4.5 trillion portfolio of government securities.

The FTSE 100 pushed higher early Tuesday as the pound fell below $1.35 against the dollar. The pound in recent sessions has hit its highest since last year's Brexit vote on expectations the Bank of England is preparing for a rate hike.

Pound strength can hurt earnings made overseas by multinational companies, or so-called dollar earners. On the FTSE 100, shares of British American Tobacco PLC (BATS.LN) (BATS.LN) pared their loss to 0.3%, liquor maker Diageo PLC (DEO) (DEO) shed 0.4% and equipment rental company Ashtead PLC (AHT.LN) trimmed its decline to 0.8%.

The U.S. dollar on Tuesday has been swinging between gains and losses ahead of the Fed decision.

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"The probability of a December [Fed] rate hike rose to 50%, too low to trigger a panic across the stock markets yet too high to be ruled out by the currency and money markets. The U.S. 10-year yield advanced to 2.22%, the 3-month average," said Ipek Ozkardeskaya, senior market analyst, at London Capital Group.

Higher yields can bode well for net interest margin at banks, so investors will keep watch on global bank stocks in anticipation of the Fed's possible announcement to begin a massive bond sale.

Some U.K. banks have operations in the U.S. In London, shares of HSBC PLC (HSBA.LN) (HSBA.LN) rose 0.9%, Lloyds Banking Group PLC (LLOY.LN) (LLOY.LN) moved up 0.4% and Royal Bank of Scotland Group PLC (RBS.LN) (RBS.LN) picked up 0.6%. But Barclays PLC (BCS) (BCS) was off 0.5%.

Read:Treasury yields extend rise as investors await Fed meeting (Treasury%20yields%20extend%20rise%20as%20investors%20await%20Fed%20meeting)

Read:HSBC reverses bearish pound view after BOE rate hints (http://www.marketwatch.com/story/we-were-wrong-hsbc-reverses-bearish-pound-view-after-boe-rate-hints-2017-09-18)

Supermarkets: Supermarket stocks pushed higher after Kantar Worldpanel said sales at British supermarkets rose 3.6% compared with the year-earlier period.

Shares of J Sainsbury PLC (SBRY.LN) rose 2.2% even as the grocer's market share in the 12 weeks to Sept. 10 fell by 0.2 percentage points, said Kantar. Shares of Wm. Morrison Supermarkets PLC (MRW.LN) rose 1.9% and Tesco PLC (TSCO.LN) tacked on 1%.

Kantar said the latest figures mark the sixth straight month that sales have risen by more than 3%.

"We haven't seen sustained market growth of this kind since May 2013. A 1.5% increase in the volume of goods going through the tills has contributed to this growth while the remainder of the overall sales increase is down to higher prices," said Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, in a statement.

But on the midcap FTSE 250 index , shares of Ocado Group PLC (OCDO.LN) fell 5.6% as the online grocery delivery company said average order size during the 13 weeks to Aug. 27 fell by 1.2% compared with the year-ago period. Overall, Ocado's revenue rose 14% during the fiscal third quarter. (http://www.marketwatch.com/story/ocado-revenue-rises-14-on-orders-growth-2017-09-19)

In other moves Tuesday, shares of International Consolidated Airlines Group SA shares (IAG.LN)(IAG.LN) were up 1.5% following a Reuters report (https://www.rte.ie/news/business/2017/0919/905849-iag-bid-for-air-berlin/) that the parent of British Airways and Aer Lingus, is among the bidders for insolvent Air Berlin.

(END) Dow Jones Newswires

September 19, 2017 05:08 ET (09:08 GMT)