Global Stocks Struggle, Sterling Falls on Bank of England Rate Rise

By Christopher Whittall and Kenan Machado Features Dow Jones Newswires

Stock markets around the world struggled to gain momentum Thursday, while the British pound fell sharply after the Bank of England raised interest rates for the first time in over a decade.

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Futures markets pointed to a small opening decline for the Dow Jones Industrial Average after Wall Street ended higher the previous day. The Stoxx Europe 600 was down 0.4% midway through the European session. Most Asian markets notched small declines.

Investors have a busy calendar of events Thursday. In the U.K., the British pound and U.K. government bond yields fell sharply after the Bank of England's rate-setting committee voted by a margin of seven to two to raise interest rates.

The pound was down 1% against the dollar and 1.4% against the euro recently. Ten-year U.K. government bonds yields were around 0.07 percentage point lower on the day, according to Tradeweb, at 1.273%. Yields fall as prices rise.

Later Thursday, investors attention will turn to Washington, where House Republican leaders are rushing to release their tax plan and President Donald Trump is expected to formally announce his decision to nominate Fed governor Jerome Powell to be the central bank's next chairman.

Analysts also remain focused on the latest batch of company earnings, which many credit as the primary driver of big gains for stocks this year. Facebook Inc. reported a sharp jump in third-quarter profit on Wednesday, while Apple Inc. is due to release results after the market closes Thursday.

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"The real momentum at the moment is with the technological sector," said Paul Markham, a fund manager with Newton Investment Management.

Mr. Markham said he is happy to own technology stocks still, even if he is worried about "the crowded nature of that" trade.

"There's no doubt that the future of the economy does sit in the hands of these guys," he said.

In Europe, shares in Credit Suisse Group AG rose 4.5% after the Swiss banking giant reported a jump in third-quarter net profit on strong growth in wealth management. Shares in Royal Dutch Shell PLC gained 0.9% after the energy company said its third-quarter profits more than doubled compared with a year earlier.

Moves in currencies and bond markets were muted after The Wall Street Journal reported the forthcoming nomination of Mr. Powell, an ally of Fed Chairwoman Janet Yellen, who is widely expected to continue the central bank's gradual approach to tightening monetary policy. Separately, the Fed kept policy on hold on Wednesday as expected and signaled it remains on course to raise interest raise rates once more this year.

The WSJ Dollar Index pared some of its earlier losses to trade flat recently. In bond markets, the yield on the 10-year Treasury note was 2.366% recently, according to Tradeweb, from 3.378% on Wednesday.

Mr. Powell is "a continuity candidate," said Nick Gartside, international chief investment officer for global fixed income at J.P. Morgan Asset Management.

Like Ms. Yellen, he thinks Mr. Powell will be a "realist" when it comes to raising interest rates and react to economic data.

"The data is strong. That's the impetus for a December rate hike and three next year," said Mr. Gartside.

In the Asia-Pacific region, China's Shanghai Composite Index fell 0.4%, while Australia's S&P/ASX 200 declined 0.1%. Japan was the region's notable outperformer, with a rally in the last hour of trading sending the Nikkei Stock Average up 0.5% to another 21-year high.

In commodity markets, Brent crude oil was down 0.6% at $60.14 a barrel. Base metals prices fell after solid gains on Wednesday.

Write to Christopher Whittall at christopher.whittall@wsj.com and Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

November 02, 2017 09:20 ET (13:20 GMT)