Miners pull back as rising dollar hits commodity prices
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U.K. stocks struggled to find momentum Thursday, even as bank shares rose after the U.S. Federal Reserve hinted at an interest-rate rise and outlined plans to begin winding down its bond buys.
The FTSE 100 index was up less than 1 point at 7,272.64 after opening slightly lower. The financial, oil and gas, and industrial groups rose, while utility, basic materials and consumer-related shares were among decliners. On Wednesday, the London blue-chip benchmark closed down 0.1% (http://www.marketwatch.com/story/ftse-100-edges-up-as-fed-decision-takes-center-stage-2017-09-20).
After trading in London closed Wednesday, the Fed said it will begin to shrink its huge $4.5 trillion balance sheet in October (http://www.marketwatch.com/story/feds-yellen-says-low-inflation-a-mystery-but-not-mysterious-enough-to-keep-rates-low-2017-09-20). The U.S. central bank also signaled plans for one more increase in interest rates before the end of 2017, which should lift borrowing costs for auto loans, mortgages and business loans. Fed policy makers also hinted at another three rate hikes in 2018.
"This may have surprised investors looking for a downward revision in the rate path due to the recent soft patch in inflation. As a result, the probability for another rate hike by December jumped to 70%, and the market bought dollars aggressively," said Charalambos Pissouros, senior analyst at IronFX, in an note.
Bank boost: The prospect of higher interest rates boosted bank stocks on Wall Street (http://www.marketwatch.com/story/financial-stocks-spike-up-after-fed-with-bank-of-america-and-wells-fargo-shares-swinging-higher-2017-09-20), and similar shares in U.K. and Europe followed suit. In London, Barclays PLC (BCS) (BCS) and Royal Bank Of Scotland Group (RBS.LN) (RBS.LN) each rose by 1.8%.
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In the group, HSBC Holdings PLC (HSBA.LN) (HSBA.LN) and Lloyds Banking Group (LLOY.LN) (LLOY.LN) each picked up 0.7%, while Standard Chartered (STAN.LN) was 0.5% higher.
Mining down: Meanwhile, shares of miners fell, as commodity prices came under pressure from a rise in the U.S. dollar after the Fed's announcement. Gold , which like other metals is priced in dollars, slumped more than 1%.
Shares of gold producers Fresnillo PLC (FRES.LN) and Randgold Resources PLC (RRS.LN) lost 3.1%, respectively. Antofagasta PLC (ANTO.LN) was down 2.7% and Rio Tinto PLC (RIO) (RIO) (RIO) declined 1.9%.
But Anglo American PLC (AAL.LN) rose 1.6%, after the family trust of Anil Agarwal, the founder of India's largest mining company Vedanta Resources PLC, revealed plans to ramp up its investment in the mining heavyweight by as much as $2 billion (http://www.marketwatch.com/story/agarwal-plans-2-bln-boost-to-anglo-american-stake-2017-09-21). That would make Volcan Investments Ltd., the largest stakeholder in Anglo American.
Stock movers: Capita PLC shares (CPI.LN) tumbled 10% after the outsourcing and professional services company posted a 26% fall in pretax profit for the first half of the year (http://www.marketwatch.com/story/capita-profit-falls-26-but-trading-in-line-2017-09-21). It did say that trading was broadly in line with expectations.
CRH PLC (CRG.DB) gained 3%. The Irish building materials supplier said it has agreed to buy Ash Grove Cement Co (http://www.marketwatch.com/story/crh-agrees-to-buy-ash-grove-cement-in-35-billion-deal-2017-09-21).(ASHG) in a deal valuing the U.S. cement provider at $3.5 billion, the companies said. (http://www.marketwatch.com/story/crh-agrees-to-buy-ash-grove-cement-in-35-billion-deal-2017-09-21)
Johnson Matthey PLC (JMAT.LN) was up 2.2% after the measuring-devices manufacturer backed its guidance for fiscal 2018 (http://www.marketwatch.com/story/johnson-matthey-sees-sales-growth-backs-guidance-2017-09-21) and said it expects sales to grow by around 6%.
Pound holds: As the dollar largely gained, sterling still managed to hold to slightly higher ground Thursday. The pound was buying $1.3504, compared with $1.3494 late Wednesday in New York.
(END) Dow Jones Newswires
September 21, 2017 04:35 ET (08:35 GMT)