Pound rallies after BOE hints rate increase is near
European stocks on Thursday ended a choppy session slightly higher, but saw gains capped as the Bank of England hinted rates could rise in coming months, and as disappointing data from China raised questions about the strength of the world's second-largest economy.
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Traders also appeared cautious about taking on more risk after the latest threats from North Korea.
The Stoxx Europe 600 index finished 0.1% higher at 381.79, after earlier flipping between small gains and losses. The pan-European benchmark is up 1.7% for the week, and it closed marginally lower Wednesday (http://www.marketwatch.com/story/european-stocks-pulled-lower-by-slide-in-apple-suppliers-2017-09-13), breaking a five-session winning run.
Miners lose ground: Mining stocks posted some of the biggest losses after China posted a surprise slowdown in business activity in August (http://www.marketwatch.com/story/chinas-industrial-output-grows-less-than-expected-2017-09-14). Value-added industrial output, a rough proxy for economic growth, slowed for a second straight month, rising 6.0% in August, compared with a 6.4% increase in July. Additionally growth in investments was the slowest in almost 18 years.
"In summary, after a better [first half] performance than many had expected, data for the first two months of [the second half of the year] suggests that China's momentum has begun to ebb somewhat," economists at Daiwa Capital Market said in a note.
Shares of Glencore PLC (GLEN.LN) fell 3.3%, Rio Tinto PLC (RIO)(RIO) (RIO) lost 3.4%, and steelmaker ArcelorMittal (MT) gave up 1.3%.
North Korea threats: Worries over the next move from Kim Jong Un returned to the fore on Thursday after Pyongyang threatened to sink Japan and "reduce the U.S. mainland into ashes and darkness." (http://www.marketwatch.com/story/north-korea-threatens-to-reduce-the-us-to-ashes-and-darkness-2017-09-14)
The isolated nation on Sept. 3 tested its largest-ever hydrogen bomb, raising concerns about a military standoff between North Korea and the U.S. The test followed a string of missile launches over the summer, with one fired right across Japanese territory.
Bank of England: The BOE kept its key interest rate on hold and made no changes to its quantitative easing program, but warned that rates could rise faster than traders currently are pricing in.
In the minutes from the central bank's meeting, the policy makers said that if the economy continues to develop as expected, "some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainably to target."
Inflation in August jumped to 2.9%, way above the BOE's target of 2%. The central bank said it expects inflation to rise above 3% in October like overshoot the target for the next three years.
"Clearly the bank isn't overly concerned about yesterday's poor wage growth data, and sees the U.K. economy picking up more quickly than expected. All eyes will be on the Bank in November, to see if it follows through on its promise to raise interest rates," said Hamish Muress, currency analyst at OFX, in a note.
The pound changed hands at $1.3397, up from around $.13207 ahead of the decision and from $1.3210 late Wednesday in New York. That represented a fresh 2017 high for the Brexit-battered currency.
The U.K.'s FTSE 100 index slumped 1.1% to end at 7,295.39 (http://www.marketwatch.com/story/uk-stocks-fall-for-3rd-day-as-traders-wait-for-boe-rate-call-2017-09-14), whacked by the pound'd leap.
In other central bank news on Thursday, the Swiss National Bank kept interest rates on hold. However, the SNB said it's ready to intervene in the currency market (http://www.marketwatch.com/story/snb-holds-rates-still-ready-to-intervene-on-franc-2017-09-14) if necessary to support the Swiss franc, which it sees as overvalued.
Read:Why the Swiss central bank may be betting on a stronger euro (http://www.marketwatch.com/story/why-the-swiss-central-bank-is-betting-on-a-stronger-euro-analysts-say-2017-09-11)
Other indexes: Germany's DAX 30 index dropped 0.1% to end at 12,540.45, while France's CAC 40 index edged up 0.2% to close at 5,225.20.
The euro traded at $1.1882, compared with $1.1885 on Wednesday.
Stock movers: Shares of Munich Re AG (MUV2.XE) edged up 0.1%, erasing an earlier loss that came after the company--the world's largest reinsurer--said it could miss its 2017 profit target and potentially post a loss (http://www.marketwatch.com/story/munich-re-warns-of-loss-due-to-harvey-irma-2017-09-14) because of the impact from Hurricanes Harvey (http://www.marketwatch.com/story/5-ways-to-make-sure-your-hurricane-harvey-donation-does-the-most-good-2017-09-01) and Irma (http://www.marketwatch.com/story/worst-case-scenario-as-hurricane-irma-makes-landfall-in-florida-2017-09-10).
Check out:Harvey, Irma could ding U.S. economy for combined $290 billion (http://www.marketwatch.com/story/harvey-irma-could-ding-us-economy-for-combined-290-billion-2017-09-10)
Wm. Morrison Supermarkets PLC (MRW.LN) lost 5.1% even after the U.K. grocer reported a 40% rise in pretax profit (http://www.marketwatch.com/story/morrisons-profit-up-40-hits-debt-target-early-2017-09-14) in the first half of fiscal 2018.
Fiat Chrysler Automobiles NV (FCA.MI) (FCA.MI) gained 2.4% after the car maker posted a 9.8% rise in sales in Europe in August.
Outside the Stoxx 600, shares of Spire Healthcare Group PLC (SPI.LN) tumbled 19% after reporting a 75% slump in first-half profit.
(END) Dow Jones Newswires
September 14, 2017 12:28 ET (16:28 GMT)