LONDON MARKETS: Post-election Pop Fades For FTSE 100 But Not For Pound

By Carla Mozee, MarketWatch

Bank of England holds key rate at record low

U.K. stocks slipped Monday, pulling back after last week's post general-election rally, but miners held to higher ground after China made another move to stimulate its economy.

Meanwhile, the pound (GBPUSD) reached a new high for 2015 as investors turned their focus to the Bank of England's upcoming inflation report.

The FTSE 100 equity benchmark ended 0.2% lower at 7,029.85, weighed down by losses among consumer-goods, financial and health-care shares.

The FTSE 100 on Friday jumped 2.3% (http://www.marketwatch.com/story/ftse-100-pound-leap-with-conservatives-on-track-for-election-win-2015-05-08) after the country's general election resulted in the Conservative Party taking a slim majority in the U.K. parliament. Read: Time to jump into U.K. stocks, says Credit Suisse (http://www.marketwatch.com/story/time-to-jump-into-uk-stocks-says-credit-suisse-2015-05-11)

Leading decliners, building-materials company CRH PLC fell 2.9%, cutting into last week's climb of more 4.5%, and shares of wealth management firm St. James Place PLC ended 2.3% lower.

But at the top of the FTSE 100 was Royal Mail PLC , with shares leaping 3.9% after competitor Whistl said it will suspend its door-to-door letter delivery service. The move comes after Dutch postal company PostNL and private-equity firm LDC in April ended talks about expanding Whistl in Britain.

Mining stocks also rose, after the People's Bank of China's decide on Sunday to cut its benchmark lending and deposit rates by a quarter of a percentage point (http://www.marketwatch.com/story/china-cuts-rates-as-economic-slowdown-deepens-2015-05-10). The third rate cut in six months highlights concerns about slowing in the world's second-largest economy. China is a major buyer of metals and other commodities.

Glencore and Anglo American PLC shares rose 1.1%, as did Rio Tinto PLC (RIO) . BHP Billiton PLC (BHP) added 0.7%.

Sterling: The pound was trading at $1.5592, surpassing $1.5583 which had previously been the highest level for the currency this year. The pound late Friday bought $1.5375.

Sterling gained as investors turned their focus to the bank's quarterly inflation report, due Wednesday, and "two important factors will be wage inflation and core inflation. Given that oil prices have bounced fairly rapidly from their lows, the footprint will start emerging rather sooner," said Naeem Aslam, chief market analyst at AvaTrade, in a note.

Momentum for the U.K. economy has shown signs of picking up and "given the election uncertainty is over, we are expecting [Bank of England Governor Mark] Carney to increase his drum beat and show more of his hawkish side," said Aslam.

The prospect of higher interest rates tends to be supportive for a country's currency.

Earlier Monday, the Bank of England met market expectations by leaving the benchmark interest rate at a record-low 0.5%. Its quantitative-easing program was also left unchanged, at 375 billion pounds ($579.5 billion).

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