LONDON MARKETS: FTSE 100 Rises With No End To Political Upheaval In Sight
Inflation report for May on deck; RBS may be near settlement
U.K. stocks moved slightly higher Tuesday, as investors focused on an update on inflation ahead, even as the country's political drama continued to unfold.
The FTSE 100 rose 0.2% to 7,528.83, with all sectors showing gains.
The benchmark on Monday fell 0.2% (http://www.marketwatch.com/story/ftse-100-falls-as-tech-stocks-suffer-uk-political-uncertainty-persists-2017-06-12), hampered by ongoing questions about what's next for the British government. The Conservative Party is attempting to hold onto power after it lost its parliamentary majority in a general election last week.
"While Prime Minister Theresa May appears determined to move past the humiliation of election night and get on with forming a government and beginning Brexit negotiations ... I think there's some way to go before people believe the country has anything that resembles stable leadership," Craig Erlam, Oanda's chief market analyst, wrote Tuesday.
"While that uncertainty hangs over the country, the pound may continue to look vulnerable as it lingers around its post-election lows. A break below 1.26 against the dollar could trigger another decline in the pair, with 1.24 perhaps being its next notable level," he added.
Inflation ahead: The pound was buying $1.2680 before the release of inflation data for May by the Office for National Statistics. It traded hands at $1.2260 late Monday in New York.
The inflation reading is expected to come in at 2.7%, according to FactSet data. That would be the same rate recorded in April, which was the highest since 2013 (http://www.marketwatch.com/story/uk-inflation-rate-at-fastest-since-2013-2017-05-16). The report is due at 9:30 a.m. London time, or 4:30 a.m. Eastern Time.
The Bank of England has said inflation should peak just below 3% this year. The central bank is expected to leave monetary policy unchanged when it releases its decision on Thursday.
Government reboot: On Tuesday, Prime Minister May is scheduled to meet with Arlene Foster, head of the Democratic Unionist Party. May is looking for an alliance with the Northern Irish lawmakers that would allow the Conservatives to form a minority government.
But the DUP has indicated that talks will center on a confidence-and-supply arrangement (http://www.marketwatch.com/story/questions-grow-over-theresa-mays-future-as-uk-prime-minister-2017-06-12). That would result in a weaker and potentially more unstable partnership, compared with a formal coalition.
May's scramble to form a new government comes before the start of negotiations with the European Union, slated for June 19, about terms of Britain's exit from the European Union.
Read: Brace for another U.K. election -- bookies give it a 50-50 chance (http://www.marketwatch.com/story/brace-for-another-uk-election-bookies-give-it-a-50-50-chance-2017-06-12)
Also read:Why Theresa May's U.K. election fiasco has traders talking about 1974 (http://www.marketwatch.com/story/why-theresa-mays-uk-election-fiasco-has-traders-talking-about-1974-2017-06-10)
Later Tuesday, May will travel to France to meet the country's President Emmanuel Macron, with security matters among the issues on the agenda. Macron's upstart En Marche party on Sunday won the first round of France's parliamentary elections (http://www.marketwatch.com/story/macrons-party-on-pace-for-landslide-win-in-french-elections-2017-06-11).
Stock movers: Royal Bank of Scotland PLC shares (RBS.LN) gained 3% after Sky News reported (http://news.sky.com/story/rbs-in-advanced-talks-over-16335bn-plus-mortgage-mis-selling-fine-10913753) the lender is near at multibillion-pound settlement with the U.S. Federal Housing Finance Agency over misselling of toxic mortgage bonds.
Merlin Entertainments PLC (MERL.LN) shares fell 2.8% after the theme park and resort operator said recent terror attacks have reduced domestic demand (http://www.marketwatch.com/story/merlin-trading-in-line-demand-down-after-attacks-2017-06-13). However, trading since the beginning of the year is in line with expectations, it said.
Ashtead Group PLC shares (AHT.LN) are up 0.6% after the equipment rental company said sterling devaluation helped pushed quarterly pre-tax profit up 5% (http://www.marketwatch.com/story/ashtead-profit-up-5-on-rental-revenue-weak-pound-2017-06-13).
(END) Dow Jones Newswires
June 13, 2017 04:15 ET (08:15 GMT)