LONDON MARKETS: FTSE 100 Wobbles With OPEC Decision In Focus; British Growth Slows
British GDP estimate downwardly revised
U.K. stocks swayed between small gains and losses Thursday, with oil shares and prices falling as investors waited for official word about production cuts from the Organization of the Petroleum Exporting Countries.
The FTSE 100 was up 0.1% at 7,522.76, but had also pushed into negative territory during morning hours, losing as much as 0.2%. The basic materials group led declining sectors, but consumer goods and services and financial shares advanced. The index on Wednesday closed up by 0.4% (http://www.marketwatch.com/story/mining-retail-shares-tug-ftse-100-slightly-into-the-red-2017-05-24).
The oil industry is in focus Thursday as OPEC is expected to announce its highly anticipated decision on whether to extend production cuts. Cuts were initially agreed in November as a way to tackle global oversupply.
Read:4 potential outcomes for OPEC's crucial meeting (http://www.marketwatch.com/story/4-potential-outcomes-for-opecs-crucial-meeting-2017-05-19)
But oil prices slid roughly 2% Thursday, retreating from gains of roughly 1% (http://www.marketwatch.com/story/oil-reverses-some-losses-as-investors-get-ready-for-opec-meeting-2017-05-25) after Saudi Arabia's oil minister Khalid al-Falih ruled out deeper cuts to oil production (http://www.marketwatch.com/story/oil-prices-turn-sharply-lower-after-saudi-oil-minister-rules-out-deeper-cuts-2017-05-25) in any extension to an OPEC output deal.
OPEC's official announcement isn't expected to arrive before 4 p.m. London time, or 11 a.m. Eastern Time, but news reports quoted an unidentified delegate (http://www.marketwatch.com/story/opec-agrees-to-extend-output-cuts-for-9-months-reports-2017-05-25-6914855) as saying a deal was in place for a nine-month extension to output cuts.
Shares of oil producer BP PLC (BP.LN) (BP.LN) fell 0.9%, remaining lower after oil prices began selling off, and Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) was down 0.4%.
The energy group has a roughly 14% weighting on the FTSE 100.
"OPEC is notorious for failing to deliver, so it'll be touch and go to see if a deal is reached," said Connor Campbell, financial analyst at Spreadex, in an early Thursday note. He added that "the market may also be reliant on dribs and drabs of information rather than anything substantial," before OPEC's press conference.
GDP: Stocks briefly dipped after the Office for National Statistics said the U.K.'s first-quarter gross domestic product estimate was revised lower, to growth of 0.2% from a flash reading of 0.3% (http://www.marketwatch.com/story/uk-first-quarter-gdp-growth-revised-down-to-02-2017-05-25). The reduction stemmed mainly from downward revisions within the services sector, said ONS.
"It would appear the economic reliance on the consumer is finally taking its toll with higher prices seen as contributing to the softer activity in the first quarter," wrote Craig Erlam, senior market analyst at Oanda.
"With wages now falling in real terms, this doesn't bode well for the coming quarters and while the Brexit vote may have taken a little longer than many expected to harm the economy, it would appear that the initial pain is starting to be felt."
(https://twitter.com/EdConwaySky/status/867669006702039040)
The pound touched an intraday high of $1.3015 as the GDP report was released, but eventually pulled back to $1.2962, down from $1.2973 late Wednesday in New York.
A stronger sterling can hurt the FTSE 100 as about 75% of the revenues for the index's companies are generated overseas.
The dollar broadly slipped Thursday and was choppy late Wednesday after minutes from the Federal Reserve's latest policy-setting meeting showed policy makers appeared set to start shrinking the bank's massive balance sheet.
The minutes also showed that most Fed officials said it would "soon" be time to raise rates again.
"The fact that the Fed has essentially pre-announced a historic shift towards shrinking its balance sheet, without a hint of a 'taper tantrum' from the markets, frees up the Fed's hand to pursue both rate and quantitative policy tightening this year -- a scenario that markets have yet to fully rationalize," said Lena Komileva Floyd, chief economist at G+ Economics.
Read:Seeing another rate hike 'soon,' Fed outlines plan to reduce bond holdings, minutes show (http://www.marketwatch.com/story/seeing-another-rate-hike-soon-fed-outlines-plan-to-reduce-bond-holdings-minutes-show-2017-05-24)
(END) Dow Jones Newswires
May 25, 2017 08:05 ET (12:05 GMT)