'Prepare for interest rates to go higher,' says Bank of England policy maker
U.K. stocks ended a wobbly Wednesday trading session slightly higher, with investors taking a cautious approach after weaker-than-expected data on the key U.K. services sector as well as rising geopolitical tensions over North Korea.
The FTSE 100 rose 0.1% to 7,367.60, after swinging in and out of losses through out the session. The London benchmark on Tuesday declined 0.3% (http://www.marketwatch.com/story/ftse-100-falls-back-into-the-red-as-oil-majors-and-miners-decline-2017-07-04), the fifth decline in six sessions.
Meanwhile, the pound briefly fell below $1.29 against the dollar after data showed activity in the services sector signaled the slowest expansion since February. The U.K. services purchasing managers' index from IHS Markit/CIPS came in at 53.4 for June, down from 53.8 in May.
"With the services sector forming such a crucial component of the U.K. economy, today's survey provides an expectation that U.K. GDP will remain depressed around the 0.4% level in Q2," wrote IG market analyst Josh Mahony.
"Amid an environment of growing rate-hike expectations, it is notable that we are likely to see those expectations fade for as long as this economic slowdown persists in the U.K.," he said.
Bank of England policy maker Michael Saunders told the Guardian newspaper (https://www.theguardian.com/business/2017/jul/04/bank-of-england-michael-saunders-interest-rates-mpc-brexit) in an interview published Tuesday that British households should "prepare for interest rates to go higher at some point."
Wednesday marks 10 years since the last time the BOE hiked interest rates.
See:3 reasons why the BOE should raise rates for the first time in a decade (http://www.marketwatch.com/story/3-reasons-why-the-bank-of-england-should-raise-interest-rates-for-the-first-time-in-a-decade-2017-07-04)
(http://www.marketwatch.com/story/3-reasons-why-the-bank-of-england-should-raise-interest-rates-for-the-first-time-in-a-decade-2017-07-04)Also read:Will the Bank of England's 10-year hiatus on rate hikes end soon? What analysts say (http://www.marketwatch.com/story/will-the-bank-of-englands-10-year-hiatus-on-rate-hikes-end-soon-what-analysts-say-2017-07-05)
Investors will scrutinize minutes from the U.S. Federal Reserve's most recent meeting, due for release later Wednesday. The Fed has largely signaled it remains on the path of raising interest rates again this year.
Worldpay takeover: Shares of Worldpay Group PLC (WPG.LN) sank 8.8% after Vantiv Inc. (VNTV) , a major U.S. credit-card processor, made an offer valuing the U.K. payments group (http://www.marketwatch.com/story/vantiv-makes-offer-for-worldpay-valued-at-10b-2017-07-05-94854557) at $10 billon. The offer beat out rival bidder J.P. Morgan Chase & Co.
"J.P. Morgan pulling out meant shares had to price out any chance of a bidding war," said Jasper Lawler, head of research, at London Capital Group, in a note.
Worldpay shares soared 28% on Tuesday after the company confirmed it had been approached by both Vantiv and J.P. Morgan.
Read:This payments processor's big stock jump shows it's in a key growth industry (http://www.marketwatch.com/story/british-payments-processor-soars-nearly-30-on-news-of-possible-american-takeover-2017-07-04)
Miners in focus: In the mining group, Glencore PLC (GLEN.LN) rose 1.3% and BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) picked up 0.6%.
But shares of precious-metals producers Fresnillo PLC (FRES.LN) and Randgold Resources Ltd. (RRS.LN) (RRS.LN) fell, losing 0.7% and 0.3% respectively, after gaining in the previous session in tandem with gold.
Gold prices on Wednesday were up 0.3% at $1,222.30, with the haven asset slightly extending gains from Tuesday. Those moves came after North Korea said its successfully test-launched an intercontinental ballistic missile, which dropped into seas near Japan. The U.S. confirmed the missile launched was capable of reaching the continental U.S. and called for global action.
Read:U.S. calls for action after North Korea successfully launches long-range missile (http://www.marketwatch.com/story/us-calls-for-action-after-north-korea-successfully-launches-long-range-missile-2017-07-05)
(http://www.marketwatch.com/story/us-calls-for-action-after-north-korea-successfully-launches-long-range-missile-2017-07-05)Oil blues: Shares in oil producers BP PLC (BP.LN) (BP.LN) and Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) each fell 1.3% as oil prices slid (http://www.marketwatch.com/story/crude-oil-sinks-after-russia-rules-out-further-production-cuts-2017-07-05). Crude was down more than 1.5% after Russia ruled out any proposals to deepen the OPEC-led production cuts.
Home builders: Persimmon PLC (PSN.LN) climbed 2.4%, but was off session highs, after the home builder said first-half revenue rose 12% (http://www.marketwatch.com/story/persimmon-revenue-up-12-on-higher-sales-2017-07-05) as it sold more homes at a higher price.
Shares of home builder Barratt Developments PLC (BDEV.LN) moved up 2.7%, and Taylor Wimpey PLC (TW.LN) claimed a 1.7% rise.
Other movers: Ocado Group PLC (OCDO.LN) was up 0.7% on the FTSE 250 index . The online grocery delivery company said its first-half revenue rose (http://www.marketwatch.com/story/ocado-profit-falls-on-distribution-center-costs-2017-07-05), but pretax profit fell on costs of opening a new distribution center and other investments.
Shares of Ocado partner Wm Morrison Supermarkets PLC (MRW.LN) were up 1.4% on the FTSE 100.
Also on the blue-chips benchmark, GlaxoSmithKline PLC (GSK.LN) fell 0.2% after a downgrade by Citi analysts to neutral from buy.
Read:The Brexit bill for U.K. banks? Up to $17 billion, warns financial industry group (http://www.marketwatch.com/story/the-brexit-bill-for-uk-banks-up-to-17-billion-warns-financial-industry-group-2017-07-03)
(END) Dow Jones Newswires
July 05, 2017 12:01 ET (16:01 GMT)