LONDON MARKETS: U.K. Stocks Close Lower After Manchester Attack, Pound Spike

Election campaigning has been suspended

U.K. stocks ended lower on Tuesday after a cautious trading day marked by the suicide bombing that killed more than 20 people in Manchester and a spike in the pound into the close.

The U.K. FTSE 100 closed 0.2% lower at 7,485.29, breaking a two-day winning run.

The index had been trading slightly higher earlier in the day, but was sent lower as the pound spiked to $1.3034 just before the European stock markets closed. A stronger sterling tends to weighed on the FTSE as about 75% of the revenues for the index's companies are generated overseas.

Fawad Razaqzada, technical analyst at Forex.com, said the move was technical, rather than traders reacting to an event.

"A lot of sellers have been liquidating their positions and we've seen record net short positions in the pound, according to CFTC. If you look at price action today, we've tried to break that $1.30 handle several times and the price stalled there. What you've had here is a run on the stops above the $1.30 handle -- that's why the market moved up sharply," he explained.

However, sterling quickly erased its gain to trade around $1.2981 later in the afternoon, compared with $1.3000 late Monday in New York.

Manchester bombing: Traders were also focusing on the Monday night explosion outside the Manchester Arena after an Ariana Grande concert that killed 22 people, including children, and injured 59. (http://www.marketwatch.com/story/death-toll-rises-to-22-in-suspected-suicide-bombing-in-manchester-2017-05-23)

Islamic State has claimed responsibility for the attack and the attacker has been named as 23-year-old Salman Abedi, according to reports.

"All acts of terrorism are cowardly attacks on innocent people, but this attack stands out for its appalling, sickening cowardice -- deliberately targeting innocent, defenceless children and young people who should have been enjoying one of the most memorable nights of their lives," U.K. Prime Minister Theresa said on Tuesday.

Political campaigning before the June 8 general election in the U.K. has been suspended. The suspension comes as a lead in the polls for British Prime Minister Theresa May's Conservative Party "continues to be eroded in favor of [Jeremy] Corbyn's Labour, with 90,000 new voters registered just yesterday," said Accendo Markets analysts in a note.

The pound had fallen below $1.30 during Monday's session as a few polls showed the Conservatives advantage over the Labour Party had been roughly halved.

Stock movers: In the travel and leisure sector, shares of amusement park operator Merlin Entertainments (MERL.LN) fell 1.5%. The company's parks include Legoland and Alton Towers.

Premier Inn hotel chain operator Whitbread PLC (WTB.LN) fell 0.9%, but airline operators International Consolidated Airlines Group SA (IAG.LN) and easyJet PLC (EZJ.LN) rose 0.5% and 2.5%, respectively. Easyjet was upgraded to sector perform from underperform at RBC.

(END) Dow Jones Newswires

May 23, 2017 12:31 ET (16:31 GMT)