LONDON MARKETS: FTSE 100 Drops After May Loses Key Brexit Vote; BOE Decision Ahead

By FeaturesDow Jones Newswires

U.K. retail sales leap in November; Lonmin shares rally after takeover

U.K. stocks declined on Thursday, as traders digested a defeat for the government's Brexit bill. The setback for British Prime Minister Theresa May is seen as potentially opening the way to a softer U.K. exit from the European Union.

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Investors were also looking ahead to the last Bank of England monetary policy meeting and decision of the year. Ahead of that, data showed a jump in monthly British retail sales.

What markets are doing: The FTSE 100 index fell 0.2% to 7,481.53, after closing marginally lower on Wednesday (http://www.marketwatch.com/story/ftse-100-wavers-around-5-week-high-with-uk-jobs-update-on-deck-2017-12-13). The benchmark was little changed after government figures on November retail sales handily beat expectations.

The pound rose to $1.3449, up from $1.3419 late Wednesday in New York. Against the euro, sterling strengthened to EUR1.1372, compared with EUR1.1347 on Wednesday.

The 10-year gilt yield rose less than 1 basis point to 1.215%, according to Tradeweb. Yields rise when prices fall.

What's driving markets: Brexit was a major focus for Thursday's trade after May's government was defeated in a key parliamentary vote on legislation for the U.K. divorce from the EU.

Late on Wednesday, the U.K.'s lower house voted to amend the Brexit bill to give members of parliament the power to reject the final divorce deal struck with Brussels. The government had warned that the measure could jeopardize a smooth exit from the EU in March 2019.

The vote -- which was an amendment to May's flagship Brexit bill -- came after a rebellion of 11 members of her own Conservative Party, and is seen as a potential route to a softer Brexit.

The pound slipped after the vote (http://www.marketwatch.com/story/british-pound-slips-as-uk-parliament-votes-to-change-brexit-plan-2017-12-13) on Wednesday, but bounced back early on Thursday.

The setback for the government comes just as EU leaders -- including May -- prepare to meet in Brussels on Thursday and Friday for a summit where Brexit features high on the agenda. The group is expected to give the green light for divorce talks to move onto the second phase (http://www.marketwatch.com/story/breakthrough-on-brexit-terms-opens-way-to-next-phase-of-talks-2017-12-08).

Central bank day arrives: Traders were also watching the BOE on Thursday. The central bank will deliver its monetary policy decision at 12 p.m. London time, or 7 a.m. Eastern Time. But after raising rates for the first time in a decade in November, the BOE is widely expected to stand pat this time.

Read: What analysts are looking for in Thursday's Bank of England meeting (http://www.marketwatch.com/story/what-analysts-are-looking-for-in-thursdays-bank-of-england-meeting-2017-12-12)

The European Central Bank is also seen keeping interest rates and quantitative easing on hold when it announces its policy decision at 12:45 p.m., or 7:45 a.m. Eastern Time. On Wednesday, the Federal Reserve lifted interest rates for the third time this year in a widely expected move.

Read:3 things to watch for at Thursday's ECB meeting (http://www.marketwatch.com/story/3-things-to-watch-for-at-thursdays-ecb-meeting-2017-12-13)

What are strategists saying: "Since [the last BOE meeting], most of the signals coming out of the British economy have been on the positive side with economic activity picking up across all sectors, wage growth moving higher and most importantly inflation still ticking to the upside," said Konstantinos Anthis, researcher at ADS Securities, in a note.

"These signals might have shaped expectations for a more bullish BOE next year, with some investors still eyeing a rate hike sooner than expected, but our view is that they might be disappointed today," he added.

What's new in economics: The pound hit an intraday high of $1.3467 after the Office for National Statistics said November retail sales rose 1.1% month-over-month, (http://www.marketwatch.com/story/black-friday-helps-boost-uk-retail-sales-2017-12-14) and by 1.6% year-on-year. Those figures outstripped expectations of 0.4% and 0.3%, respectively, in a FactSet survey of analysts.

Customers picking up household appliances and other goods during Black Friday events helped bolster sales, said the ONS.

The report wraps up a busy week of U.K. government economic data. Earlier this week, the ONS said Britons' wages adjusted for inflation (http://www.marketwatch.com/story/uk-wages-fall-again-in-ongoing-consumer-squeeze-2017-12-13) fell 0.4% in the three months to October, the eight consecutive month of declines. Consumer price inflation hit a 3.1% annual rate (http://www.marketwatch.com/story/uk-inflation-hits-almost-6-year-high-2017-12-12) in November, the highest since March 2012.

Stock movers: Shares of retailers were lower even after the strong U.K. sales report. Marks and Spencer shares (MKS.LN) were down 0.1% and Next PLC (NXT.LN) was off 0.5% . Kingfisher PLC (KGF.LN) and Associated British Foods PLC (ABF.LN) , which runs fast-fashion company Primark, were each off 0.1%.

Shares of Lonmin PLC (LMI.LN) jumped 24% on the FTSE 250 after South Africa's Sibanye-Stillwater (SGL.JO) said it'll buy the UK.-listed struggling miner (http://www.marketwatch.com/story/lonmin-agrees-to-takeover-by-sibanye-stillwater-2017-12-14) for about GBP285 million ($382.83 million).

Fellow precious metals miner Randgold Resources Ltd. (RRS.LN) (RRS.LN) climbed 1.7% on the FTSE 100 as gold prices climbed 0.7% (http://www.marketwatch.com/story/gold-climbs-after-fed-sticks-to-3-rate-hikes-next-year-2017-12-14).

Capita PLC (CPI.LN) slid 14% after a trading update (http://www.marketwatch.com/story/capita-sees-2017-in-line-bids-wont-add-to-profit-2017-12-14).

(END) Dow Jones Newswires

December 14, 2017 05:11 ET (10:11 GMT)