LONDON MARKETS: FTSE 100 Tiptoes Around Record High, As Banks Rise But Home Builders Drop

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Bonds in focus as yields rise

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U.K. blue-chip stocks clung close to record highs Wednesday, as financial shares rose while those of home builders lost ground, before a raft of British economic data were released.

What the market is doing: The FTSE 100 index was up 0.1% at 7,735.05, but it had opened slightly in the red. Tech, financial, oil and gas and utility shares rose, but health care, basic material and consumer-related stocks fell. On Tuesday, the index rose 0.5% to 7,731.02, a fresh all-time closing high (http://www.marketwatch.com/story/ftse-100-flirts-with-fresh-record-as-morrisons-leads-retailers-higher-2018-01-09).

The pound traded at $1.3517, down from $1.3539 late Tuesday in New York.

The 10-year gilt yield rose 2 basis points to 1.29%, according to Tradeweb. Yields rise when prices fall.

Read:These 5 charts are all 'flashing green' for more U.K. stock records (http://www.marketwatch.com/story/these-5-charts-are-all-flashing-green-for-more-uk-stock-records-2018-01-08)

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What's driving the market: A tug-of-war between sectors was driving the action on the London benchmark, even as the positive investing mood for stocks persisted.

Most bank stocks were putting in a strong performance, tracking the sector's gains in Europe and on Wall Street on Tuesday as regional bond yields advanced. Notably, the U.S. 10-year yield crossed above 2.5% for the first time since March 2017 (http://www.marketwatch.com/story/treasury-yields-rise-as-bank-of-japan-cuts-bond-buying-2018-01-09).

But shares of home builders fell after Taylor Wimpey PLC (TW.LN) said it expects yearly results to be in line with expectations.

Major energy companies got a lift as oil prices pushed to fresh three-year highs (http://www.marketwatch.com/story/oil-prices-push-to-fresh-3-year-highs-ahead-of-us-supply-data-2018-01-10), on expectations that an official report today will show a drop in U.S. supplies.

Traders may find a catalyst in a clutch of U.K. economic data for November scheduled for release at 9:30 a.m. London time, or 4:30 a.m. Eastern Time. The reports include updates on industrial and manufacturing production and construction output.

What strategists are saying: "With stocks continuing higher, bond markets continue to struggle, with yields hitting some of the highest levels in a decade," said James Hughes, chief market analyst at Axi Trader.

"Inflation is a big issue for many investors moving into 2018, especially after the Fed had dismissed the sluggish rate in its last couple of policy setting meetings. So with the U.S. CPI reading due on Friday afternoon, it is a case of bond markets waiting for the release," Hughes said in a note.

Retail in focus: J Sainsbury PLC shares (SBRY.LN) climbed 1.5% after the supermarket chain said same-store sales for the third quarter of fiscal 2018, which includes the key Christmas trading period, grew 1.1% (http://www.marketwatch.com/story/sainsburys-upbeat-on-profit-christmas-sales-rise-2018-01-10). But the company also said "market conditions remain challenging" and that it's cautious about the consumer environment in the year ahead.

Shares of rivals Wm Morrison Supermarkets (MRW.LN) and Tesco PLC (TSCO.LN) each fell 0.6%.

Stock movers: Taylor Wimpey PLC (TW.LN) said its 2017 results should meet analyst expectations as home completions increased, but investors sent shares down 3%. The U.K. home builder said it plans on returning about GBP500 million ($677 million) in dividends (http://www.marketwatch.com/story/taylor-wimpey-to-return-500-mln-to-shareholders-2018-01-10) to shareholders in 2018.

Shares of rival construction companies were under pressure. Persimmon (PSN.LN) lost 1.7%, and Barratt Developments PLC (BDEV.LN) fell 1.5%.

Bank stocks, however, pushed higher, with Royal Bank of Scotland Group PLC (RBS.LN) (RBS.LN) up by 2.1%, HSBC Holdings PLC (HSBA.LN) (HSBA.LN) rising 2.2% and Standard Chartered PLC (STAN.LN) picking up 1.4%.

But Lloyds Banking Group PLC (LLOY.LN)(LLOY.LN) and Barclays PLC (BCS) (BCS) lost 0.2% and 0.6%, respectively.

Among energy companies, BP PLC (BP.LN) (BP.LN) and Royal Dutch Shell PLC (RDSB.LN) shares gained 0.4% and 0.7%, respectively, as oil futures climbed.

(END) Dow Jones Newswires

January 10, 2018 04:34 ET (09:34 GMT)