LONDON MARKETS: FTSE 100 Under Pressure As Banks Fall, Pound Rises Against The Euro

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Consumer-credit growth represents 'pocket of risk', says Bank of England committee

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U.K. stocks slipped Monday, struggling as sterling climbed against the euro in the wake of Germany's general election, and as bank stocks sagged as the Bank of England reiterated a warning about risks from credit growth.

The FTSE 100 index fell 0.1% to close at 7,301.29, led by financial and mining shares. On Friday, the London benchmark rose 0.6% (http://www.marketwatch.com/story/ftse-100-sags-as-north-korea-us-tensions-flare-up-2017-09-22) and logged a weekly rise of 1.3%, the best week since early August, according to FactSet data.

But Monday's session began with investors watching the pound scale higher against the euro and the dollar. A strong value of the pound can eat into revenue overseas by multinational companies when they are repatriated, and, in turn, hurt shares of those companies that combined weigh heavily on the FTSE 100.

Among such names, British American Tobacco PLC (BATS.LN) (BATS.LN) fell 0.6%, engine producer Rolls-Royce Holdings PLC (RR.LN) (RR.LN) shed 1% and building-materials supplier CRH dropped 1%.

Against the euro, sterling bought EUR1.1359, more than EUR1.1295 late Friday in New York. But in dollar dealings, the pound backed off intraday highs and traded at $1.3456 compared with $1.3495 on Friday.

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A "less than convincing Federal election win for German Chancellor Angela Merkel and French President Macron struggling in senate elections," dented the euro on Monday (http://www.marketwatch.com/story/euro-weakens-after-german-election-results-2017-09-25), said analysts at Accendo Markets.

The victory of Merkel's center-right bloc (http://www.marketwatch.com/story/germanys-anti-immigrant-party-set-to-be-first-in-more-than-50-years-to-enter-parliament-2017-09-24) over the center-left Social Democrats all but assures a fourth term for the Chancellor. However, Merkel's Christian Democrats and its Bavarian sister party logged their worst result since 1949, as the anti-immigrant Alternative for Germany (AfD) party won around 13% of the vote, becoming the first far-right party to win seats in Parliament in more than 50 years.

Read:How Merkel's choice of partner could set the tone for the euro (http://www.marketwatch.com/story/dont-call-the-german-election-boring-it-could-mean-a-huge-shift-for-the-eurozone-2017-09-18)

Also read:Once German risk passes, China and the EU are waiting in the wings (http://www.marketwatch.com/story/once-german-risk-passes-china-and-the-eu-are-waiting-in-the-wings-2017-09-22)

In France, President Emmanuel Macron's centrist party La République en Marche won fewer seats than had been anticipated in Sunday's senate election.

More political developments may emerge Monday from Brussels where the fourth round of Brexit talks between the U.K. and the EU were set to take place.

The "FTSE could see more resistance into its 200-day moving average (7337p) due to the strong pound," said LCG's senior market analyst Ipek Ozkardeskaya in a note.

Banks: Shares of lenders were lower as the Bank of England ramped up its warning about growth in household debt. The central bank's Financial Policy Committee in a quarterly statement said banks may be left with GBP30 billion ($40.5 billion) in losses if borrowers were to default on 20% of the loans taken out. The warning raised concerns that banks will have to set aside another GBP10 billion in capital to safeguard against such risks.

Shares of Barclays PLC (BCS) (BCS) fell 1% and Lloyds Banking Group PLC (LLOY.LN) (LLOY.LN) lost 1.6%. Standard Chartered PLC (STAN.LN) fell 1.7% and HSBC PLC (HSBA.LN) (HSBA.LN) ended down by 0.8%. Royal Bank of Scotland Group PLC (RBS.LN)(RBS.LN) lost 0.3%.

Read:BOE warns about growth of U.K. consumer credit (http://www.marketwatch.com/story/boe-warns-about-growth-of-uk-consumer-credit-2017-09-25)

Stock movers: Unilever PLC (ULVR.LN) (ULVR.LN) turned higher by 0.1%. The consumer products heavyweight reached a deal to buy skin-care business Carver Korea for 2.27 billion euros (http://www.marketwatch.com/story/unilever-agrees-to-buy-carver-korea-for-227-bln-2017-09-25) ($2.7 billion), a move Unilever said will strengthen its position in northern Asia.

On the midcap FTSE 250, packing company Essentra PLC (ESNT.LN) gave up 1.3% after saying Hurricane Maria has disrupted activity at two of its facilities in Puerto Rico and said profit will be hurt due to other storms.

Tullow Oil PLC (TLW.LN) rallied 7.1% after the oil explorer said it'll restart drilling in Ghana after a territorial dispute went in its favor.

(END) Dow Jones Newswires

September 25, 2017 12:10 ET (16:10 GMT)