Benchmark logs worst monthly decline since September 2015
Stocks in the U.K. fell Friday, with investors wrapping up the worst monthly performance in more than a year on a report of paltry economic growth and a rising pound.
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The FTSE 100 ended 0.5% lower at 7,312.72, losing grip of a small intraday gain after the pound pulled back from a six-week high. Still, the currency rose more than 2% gain against the greenback this week. Friday's decline was the FTSE's fourth in a row.
The London benchmark can be sensitive to pound moves, as a stronger value of sterling can hurt revenues made overseas by multinational companies when sales are repatriated into local currency.
Equities felt the weight of the pound as well as the final reading of U.K. gross domestic product for the first quarter, which sat at a lackluster 0.2% growth rate. That is much weaker than the 0.7% expansion logged in the fourth quarter of 2016.
"The updated information on how the sectoral pattern of growth fared between January and March reaffirms our view that Q1 data show clear signs of the consumer cash squeeze hitting economic momentum," said Investec economist Victoria Clarke in a note.
Sterling bought as much as $1.3031 before the GDP report was released, and hit an intraday low of $1.2947 after the data.
The pound later bounced back to $1.2992, not far from late Thursday's level of $1.3009, the highest New York settlement since May 19.
Some so-called dollar-earners advanced as the pound pulled back. Luxury goods maker Burberry Group Ltd. (BRBY.LN) closed up 0.8% after rising more than 1.5%. Specialty chemicals maker Mondi PLC (MND.JO) ended 1.6% higher, topping the FTSE 100.
On Friday, oil and gas, utility and financial shares saw the steepest losses, while technology and industrials ended in the green.
For the week, the blue-chip index fell 1.5% and locked in a June decline of 2.8%. That is the worst monthly loss since September 2015, according to FactSet data. The benchmark fell 0.1% for the second quarter, leaving its first-half 2016 gain at 2.4%.
The more domestically focused FTSE 250 ended Friday's session down 6.2 points at 19,340.15. It finished the first-half of the year higher by 7%.
BOE fallout: The pound's rise above $1.30 came in part after Bank of England Gov. Mark Carney this week hinted at an interest-rate increase (http://www.marketwatch.com/story/boe-chief-carney-hints-at-rate-rise-2017-06-28).
The signals coming out of the BOE have prompted UBS to drop its forecast for further monetary easing in the U.K.
"This change of call is entirely a response to the recent change in tone of several [Monetary Policy Committee] members, and in no way a sign that our expectations for the U.K. economy have improved," wrote UBS strategist John Wraith in a Thursday note.
"On the contrary, we are increasingly convinced the slowdown seen in Q1 2017 is set to persist and probably intensify over the period to the U.K.'s EU exit at the end of Q1 2019," he said.
Read:Central banks set up investors for a long, hard road back to 'normal' (http://www.marketwatch.com/story/investors-face-a-long-hard-road-back-to-normal-2017-06-29)
And see:Here's why the stock market is spooked by central bankers (http://www.marketwatch.com/story/heres-why-the-stock-market-is-spooked-by-central-bankers-trump-agenda-delays-2017-06-29)
Stock movers: Lloyds Banking Group (LLOY.LN) fell 1.5%. The lender reportedly missed its own end-of-June deadline (http://www.bbc.co.uk/news/business-40457104) to compensate victims of fraud at HBOS, which it purchased in 2009.
Advancers included Royal Mail PLC (RMG.LN) and Standard Life PLC (SL.LN), with the postal carrier closing up 1.5% and the investment services provider claiming a 1%.
British Airways parent International Consolidated Airlines Group SA (IAG.LN) rose 0.4%. The airline's cabin crew is set to begin a 16-day strike on Saturday.
Among decliners, United Utilities Group PLC (UU.LN) fell 3.5% following a downgrade to underperform from outperform at Credit Suisse.
Retailer Next PLC (NXT.LN) slumped 3%.
Economic data: Confidence among U.K. consumers soured significantly (http://www.marketwatch.com/story/uk-consumer-confidence-sours-in-june-2017-06-30)in June, a GfK survey published Friday showed, on growing concerns about the economy and their own financial situation.
(http://www.marketwatch.com/story/uk-first-quarter-gdp-growth-revised-down-to-02-2017-05-25)Services-sector activity expanded 0.2% in April, compared with expectations of 0.3% in a FactSet survey of economists.
(END) Dow Jones Newswires
June 30, 2017 12:33 ET (16:33 GMT)