British Gas parent logs worst session on record; think tank warns on U.K. wages
British blue-chip stocks ended slightly in the red on Thursday, following a three-day move higher. The London benchmark was led down by a double-digit plunge in shares of British Gas parent Centrica PLC after a disappointing financial update.
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Traders continued to ponder the Autumn Budget presented Wednesday by Chancellor of the Exchequer Philip Hammond, which included downgrades to the government's forecasts for U.K. economic growth (http://www.marketwatch.com/story/ftse-100-on-course-for-3rd-straight-gain-with-uk-budget-on-deck-2017-11-22).
How markets fared: The FTSE 100 index ended down 1.8 point at 7,417.24, but finished off session lows. The financial and utilities sectors closed lower, but tech and consumer goods stocks led advancers.
The London benchmark had risen 0.5% over the previous three sessions to an almost two-week high (http://www.marketwatch.com/story/ftse-100-edges-lower-as-brexit-hopes-buoy-pound-2017-11-21). The gauge is up 3.8% for the year, lagging the Stoxx Europe 600's rise of 7.1% and the U.S. S&P 500's rally of 16%.
The pound changed hands at $1.3301, down from $1.3324 late Wednesday in New York. The currency is up about 0.6% for the week, stretching its year-to-date gain to nearly 8%. It remains well below the $1.50 level that it hit just before the U.K.'s June 2016 vote to leave the European Union, or Brexit.
See:How German political turmoil could hurt the pound more than the euro (http://www.marketwatch.com/story/heres-why-german-political-turmoil-could-hurt-sterling-more-than-the-euro-2017-11-21)
The pound fell to an intraday low of $1.3285 after the release of the U.K. gross domestic product report for the third quarter. The British economy expanded 0.4% quarter-over-quarter, and by 1.5% year-over-year, the Office for National Statistics said. Those figures matched expectations.
What strategists are saying: "Although on the face of it, the downgrade to the U.K. growth forecasts and the weak productivity theoretically should be bad news for sterling, the market is most likely pricing out the probability of a collapse in the government," said Kathleen Brooks, research director at City Index, in a note.
"Hammond's generally well-received performance is the first solid piece of good news for [Prime Minister] Theresa May after a torrid month," she added.
Resignations by key cabinet ministers and a threatened rebellion from within her party's own ranks were only two of the factors putting pressure on U.K. leader May and her government (http://www.marketwatch.com/story/how-an-unsent-letter-to-theresa-may-is-driving-the-pound-lower-2017-11-13) this month.
Stock movers: Centrica shares (CNA.LN) sank 15.5%, their worst session on record, for the FTSE 100's biggest drop. The utility company warned Thursday that its energy supply businesses have had a disappointing second half (http://www.marketwatch.com/story/centrica-says-on-track-to-hit-2017-targets-2017-11-23) and gave a full-year adjusted earnings outlook that was below the market consensus.
Severn Trent PLC shares (SVT.LN) rose 0.6% after the water company reported a slight rise in interim profit before tax and raised its dividend (http://www.marketwatch.com/story/severn-trent-profit-rises-on-increased-turnover-2017-11-23).
The Autumn Budget out yesterday whacked home-builder shares, as it included plans to move toward taking land from developers who fail to build houses. Those stocks recovered some ground Thursday.
Barratt Developments PLC (BDEV.LN) picked up 1.8%, Berkeley Group Holdings PLC (BKG.LN) gained 2%, and Persimmon PLC (PSN.LN) added 1%.
Other developments: The Institute for Fiscal Studies on Thursday said the outlook for wages for Britons is looks bleak after the government cut its forecasts for productivity and economic activity.
"Average earnings look like they will be nearly GBP1,400 a year lower than forecast [in March 2016], still below their 2008 level. We are in danger of losing not just one but getting on for two decades of earnings growth," the think tank's director Paul Johnson wrote in an assessment of the Autumn Budget.
(END) Dow Jones Newswires
November 23, 2017 11:59 ET (16:59 GMT)