LONDON MARKETS: Lloyds Drags On FTSE 100, As Investors Focus On GDP

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Fall in metals prices hurt miners

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U.K. stocks slipped Wednesday, as miners lost ground and investors braced for a reading on GDP that should reflect the health of the British economy after a run of poor data.

What stocks are doing: The FTSE 100 index edged down 0.1% to 7,519.10, led by industrial and basic material shares. But the consumer goods and health care groups moved higher.

On Tuesday, the London benchmark rose less than 0.1% (http://www.marketwatch.com/story/uk-stocks-waver-as-whitbread-slides-on-costa-concerns-2017-10-24), ekeing out a third straight gain. It was also the third session in a row that closed with a move smaller than 0.1%.

Stock movers: Shares of Lloyds Banking Group PLC (LLOY.LN) fell 1.2%. The lender said third-quarter pretax profit more than doubled (http://www.marketwatch.com/story/lloyds-upgrades-outlook-after-pretax-profit-soars-2017-10-25), but loan impairments increased.

Miners struggle: A pullback in metals prices weighed on mining stocks. Copper fell nearly 1%, while gold was off 0.3%.

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"[I]mproved U.S. yields weigh on gold prices," Ipek Ozkardeskaya, senior market analyst at London Capital Group, wrote in a note. "Gold miners (Randgold and Fresnillo) will likely remain under pressure on cheaper gold."

Shares of Randgold Resources PLC (RRS.LN) (RRS.LN) lost 0.4%, while Fresnillo PLC (FRES.LN) gave up 0.7%.

The benchmark 10-year Treasury yield (http://www.marketwatch.com/story/10-year-treasury-yield-pushes-above-240-2017-10-24) on Tuesday climbed to its highest level since early May, pushing past 2.40%. Gold, which does not yield interest, typically moves in the opposite direction to U.S. bond yields, because it becomes less attractive to investors.

Meanwhile, Antofagasta PLC (ANTO.LN) said Wednesday its third-quarter production increased by 3% on the previous quarter (http://www.marketwatch.com/story/antofagasta-production-rises-cuts-cost-guidance-2017-10-25). The miner cut its cash-cost expectation for the full year. However, nine-month gold production fell 4.4%. Shares were down 4.2%.

Fresnillo posted a 24% rise in silver production and a 6% increase in gold output for the third quarter of 2017, as it backed its full-year guidance (http://www.marketwatch.com/story/fresnillo-silver-gold-production-up-backs-view-2017-10-25).

GDP in focus: Investors will get the first reading on U.K. gross domestic product in the third quarter, which should show the pace of economic growth in the country.

After a string of disappointing data, the report will be watched by policy makers at the Bank of England as they consider the next move for interest rates on Nov. 2.

The flash reading GDP is due at 9:30 a.m. London time, or 4:30 a.m. Eastern Time, from the Office for National Statistics. Growth is expected to come in at 0.3% over the previous three months, and year-over-year growth is projected at 1.5%, according to analysts polled by FactSet.

The pound traded at $1.3121 ahead of the GDP report, compared with $1.3133 late Tuesday in New York.

What strategists are saying:

-- "With expectations still rife that the Bank of England will raise interest rates next month, today's GDP figures will be closely scrutinised to see whether they give any excuse for policymakers to hold fire or if they support their hawkish intent," said Rebecca O'Keeffe, head of investment at Interactive Investor.

"Uncertainty about Brexit, the relatively fragile state of the British economy and fears over personal debt and household incomes could all be making Mr. Carney think twice about whether now is the right time to start the process of raising rates. However, the prospect of delaying could lead to accusations of the MPC crying wolf again and severely dent sterling," she added in her note.

-- "Next week's decision looks increasingly likely to be a split decision, however it would be a big surprise if the bank decided to pull back from a rate move at this late stage, particularly since today's first iteration of Q3 GDP is expected to show that the economy grew at 0.3%," said Michael Hewson, chief market analyst at CMC Markets UK, in a note.

(END) Dow Jones Newswires

October 25, 2017 04:24 ET (08:24 GMT)