Upside capped as British pound hits 10-month high
Blue-chip stocks in the U.K. pared gains Monday as the pound touched a 10-month high against the dollar, but stock in banking heavyweight HSBC PLC held to higher ground as July trade came to a close.
The FTSE 100 ended up 0.1% at 7,372.00, logging a 0.8% monthly gain for July. That followed June's decline of 2.8%.
The FTSE 100 was clipped during the session as the pound hit $1.3200 against the U.S. dollar, the strongest since September 2016, FactSet data showed.
Pound strength can hurt revenue and earnings made overseas by multinational companies that are heavily weighted on the FTSE 100. The pound's strength comes amid broad-based dollar weakness, with the ICE dollar index, a measure of the U.S. currency against a basket of six major rivals, on course for its biggest monthly decline since January (http://www.marketwatch.com/story/dollar-rebounds-but-stays-on-course-for-worst-month-since-january-2017-07-31).
See:July's best performing assets--in charts (http://www.marketwatch.com/story/julys-best-performing-assetsin-charts-2017-07-31)
There is "a lot of dollar softness out there, with political uncertainty and doubts around the Federal Reserve's capacity to raise rates again this year," wrote Neil Wilson, ETX Capital's senior market analyst. "The dollar has lost 10% this year and is showing no signs of arresting that decline."
Stock movers: HSBC (HSBA.LN) (HSBA.LN) shares closed up 1.8% after jumping by 3.8% intraday. The London-based, Asia-focused lender said it would launch another $2 billion in share buybacks (http://www.marketwatch.com/story/hsbc-to-launch-2-billion-buyback-as-profit-up-57-2017-07-31) after second-quarter profit leapt 57% to $3.87 billion.
"HSBC's exposure to China during a time of expanded government stimulus and Europe experiencing its best growth since the financial crisis has helped keep the bank's restructuring plan well on track," said LCG head of research Jasper Lawler in a note.
Shares of fellow Asian-focused lender Standard Chartered PLC tacked on 2.4% and Royal Bank of Scotland Group PLC (RBS.LN)(RBS.LN) turned higher by 0.7%. But Barclays PLC (BCS) (BCS) fell 1% and Lloyds Banking Group PLC (LLOY.LN)(LLOY.LN) ended lower by 1.4%.
During the session, Moody's Investors Service warned that British households are increasingly grappling with debt (http://www.marketwatch.com/story/british-consumers-grappling-with-heavier-debt-loads-moodys-2017-07-31)at a time the U.K. economy is showing signs of slowing.
"Household debt is high and still growing, leaving consumers vulnerable to an economic downturn, while higher inflation, weaker wage growth and levels of indebtedness leaves those in lower-income brackets the most exposed," wrote Greg Davies, a research analyst at Moody's.
Investors will want to hear more about consumer conditions when the Bank of England releases its latest policy decision and August inflation report on Thursday.
Meanwhile, mining shares pushed higher after Chinese data released early Monday showed growth in construction activity rose to its highest level since December 2013, thanks to government-backed infrastructure spending. China is a major buyer of industrial and precious metals.
Shares of iron ore producers BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) and Rio Tinto PLC (RIO) (RIO) (RIO) tacked on 1% and 0.5%, respectively, and Anglo American PLC (AAL.LN) bulked up by 1.7%.
Shares of commodity producer and trader Glencore PLC (GLEN.LN) closed up 0.8%, as did shares of copper miner Antofagasta PLC (ANTO.LN).
But overall, China's gauge of manufacturing activity declined to 51.4 in July (http://www.marketwatch.com/story/sluggish-china-factory-data-may-signal-slowdown-2017-07-31), compared with expectations of a 51.6 reading from a Wall Street Journal survey of analysts. That downtick was seen by some economists as the first and expected sign that the economy is slowing after the government began to try to rein in a hot property market and rising corporate debt.
Cigarette pull: Tobacco stocks extended losses after Friday afternoon's announcement by the U.S. Food and Drug Administration that it's proposing a plan for nicotine levels in cigarettes to be lowered to nonaddictive levels (http://www.marketwatch.com/story/fda-says-it-plans-to-lower-nicotine-levels-in-cigarettes-to-non-addictive-levels-2017-07-28).
Lucky Strike maker British American Tobacco Inc. (BATS.LN) was pushed down 5%, and Imperial Brands (IMBBY), which makes Salem, Kool and Winston products, slid 5.9%.
(END) Dow Jones Newswires
July 31, 2017 12:54 ET (16:54 GMT)