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UKX FTSE 100 Index

7,954.70
22.72 (0.29%)
Last Updated: 09:00:33
Delayed by 15 minutes
Name Symbol Market Type
FTSE 100 Index FTSE:UKX FTSE Indices Index
  Price Change % Change Price High Price Low Price Open Price Traded Last Trade
  22.72 0.29% 7,954.70 7,960.88 7,931.98 7,931.98 0 09:00:33

LONDON MARKETS: FTSE 100 Closes Lower As 'Trump Trade' Fades; Muted Reaction To London Attack

22/03/2017 5:40pm

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By Carla Mozee and Victor Reklaitis, MarketWatch

Bank shares shoved lower

U.K. stocks closed lower Wednesday, with the "Trump trade" that's been driving a global stock rally seeming to fade as investors turned more pessimistic about the chances of the new U.S. president driving through planned reforms.

Traders were also continuing to reassess the outlook for U.K. monetary policy, especially the path of interest rates, after a faster-than-expected increase in British inflation. They didn't show a big reaction to an attack on Thursday afternoon near the U.K.'s Houses of Parliament in London that authorities were treating as a terrorist incident.

The FTSE 100 slumped 0.7% to end at 7,324.72, finishing at its lowest level since March 9, or nearly two weeks ago.

Some analysts said the downbeat mood in markets has been triggered by doubts about the implementation of the Trump administration's tax and reform policies in the U.S. Hopes for an economic boost from the plans have been driving a rally in stocks globally, known as the "Trump trade."

"Even the mistiest eyed optimist appears to be coming to the realization that even on health care where there is some form of consensus, that reforms are likely to take a lot longer than realized and as such any other programs like tax and banking reform and infrastructure spending are likely to get pushed further out into the future," said Michael Hewson, chief market analyst at CMC Markets UK, in a note.

Read:Here's the latest sign that the 'Trump trade' is losing traction (http://www.marketwatch.com/story/heres-the-latest-sign-that-the-trump-trade-is-losing-traction-2017-03-21)

And:Trump goes to bat for 'Trumpcare' ahead of vote (http://www.marketwatch.com/story/trump-today-president-goes-to-bat-for-trumpcare-ahead-of-vote-2017-03-21)

Investors will be looking for more signs of whether the push for reforms in the U.S. will be successful in Thursday's vote in the U.S. House of Representatives on the Republican Party's health care plan.

In the London attack, shots were fired, a police officer was stabbed, and a car ran down people on Westminster Bridge, according to media reports. Sky News reported two people were dead. The FTSE 100 largely maintained its losses as headlines about the violence came out.

See:Pedestrians mown down by car, police officer stabbed in apparent terror attack near U.K. parliament (http://www.marketwatch.com/story/shots-fired-near-uk-parliament-police-treating-it-as-terrorist-incident-2017-03-22)

And:'Frightening' -- people at the scene react to violence outside U.K. parliament (http://www.marketwatch.com/story/frightening-people-at-the-scene-react-to-violence-outside-uk-parliament-2017-03-22)

Banks drop: Expectations that the Trump administration will loosen U.S. regulations on banks and that the Fed will continue to raise interest rates have helped drive gains for the bank sector globally. On Wednesday in London, bank stocks gave up some of those gains.

Barclays PLC (BCS) (BCS) shed 2.4%, HSBC Holdings PLC (HSBA.LN) (HSBA.LN) (HSBA.LN) dropped 1.2%, and Lloyds Banking Group PLC (LLOY.LN) (LLOY.LN) lost 1.6%.

Meanwhile, Royal Bank of Scotland PLC shares (RBS.LN) (RBS.LN) fell 1.3%, and Standard Chartered PLC shares (STAN.LN) declined 0.9%.

Scotland and sterling: The pound recently changed hands at $1.2480, close to its level late Tuesday of $1.2479.

The Scottish parliament's debate related to a new independence referendum was suspended on Wednesday (http://www.marketwatch.com/story/scottish-lawmakers-debate-on-independence-halted-after-london-attack-2017-03-22) after the attack in London.

Most Holyrood lawmakers have been expected to support First Minister Nicola Sturgeon's push (http://www.marketwatch.com/story/pound-pushed-lower-as-scottish-referendum-worries-emerge-2017-02-27) for a second referendum on whether Scotland should leave the U.K. She has said she's concerned about Scotland's economic future when it eventually leaves the European Union. U.K. Prime Minister Theresa May doesn't support Sturgeon's stance.

In 2014, Scots by 55% to 45% voted to remain part of the U.K. alongside England, Wales and Northern Ireland.

Sterling early Wednesday hit an intraday high of $1.2507, the first time since Feb. 24 it traded above $1.25, according to FactSet data. It jumped Tuesday after data showed British inflation rose to 2.3%, overshooting the Bank of England's 2% target for the first time since September 2013. That stoked speculation the central bank may be compelled to raise interest rates sooner than later.

See: U.K. rate hike in May? (http://www.marketwatch.com/story/boe-rate-hike-in-may-pressure-mounts-after-uk-inflation-jumps-to-3-year-high-2017-03-21)

The pricier pound weighed on blue-chip stocks, as a weaker sterling could help increase earnings and sales for multinational companies listed in London.

Read:Opinion: Distracted by the Continent, May ignores trouble brewing in Scotland (http://www.marketwatch.com/story/distracted-by-the-continent-may-ignores-trouble-brewing-in-scotland-2017-03-21)

And:Bookies are more certain than ever that the U.K. headed for a 'snap' election (http://www.marketwatch.com/story/is-the-uk-headed-for-a-snap-election-this-year-bookies-are-more-certain-than-ever-2017-03-20)

Other stock movers: Kingfisher PLC (KGF.LN) finished down by 5.1% after the home-improvement retailer flagged concerns about the uncertainty for the U.K. economy (http://www.marketwatch.com/story/kingfisher-profit-rises-chairman-to-retire-2017-03-22) in the wake of the Brexit vote. The company said it remains cautious on its outlook for France ahead of the upcoming presidential election.

See:How Brexit is hurting U.K.-focused stocks -- in one chart (http://www.marketwatch.com/story/how-brexit-is-hurting-uk-focused-stocks-in-one-chart-2017-03-22)

 

(END) Dow Jones Newswires

March 22, 2017 13:25 ET (17:25 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.

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