LONDON MARKETS: U.K. Stocks Halt 2-session Skid, But Gains Capped By Pound Rally

By Sara Sjolin, MarketWatch

Investors are still digesting Wednesday's attack in London

U.K. stocks closed slightly higher on Thursday, underperforming the broader European markets as a rally in the pound limited gains after retail sales beat expectations.

Investors were also still digesting the attack in London on Wednesday afternoon, which left at least four people dead and dozens injured. Police is treating the incident as a terrorist attack.

The FTSE 100 index ended 0.2% higher at 7,340.71, snapping a two-day losing streak. That compared with a 0.9% jump in the pan-European (http://www.marketwatch.com/story/european-stocks-hover-at-week-lows-as-investors-eye-us-health-care-vote-2017-03-23) Stoxx Europe 600 index , which was getting a boost from an upbeat session in the U.S (http://www.marketwatch.com/story/wall-street-stocks-lined-up-for-cautious-moves-ahead-of-yellen-speech-health-care-vote-2017-03-23). ahead of a key vote on a health-care bill.

The underperformance came as the pound rose to an intraday high of $1.2531 after U.K. retail sales for February rose 1.4% (http://www.marketwatch.com/story/uk-retail-sales-surge-14-in-february-2017-03-23), easily beating forecasts of 0.4%. Sterling traded at $1.2484 late Wednesday in New York. A stronger pound tends to weigh on the many FTSE 100 companies that make the bulk of their revenue overseas and then transfer their profit back to the U.K.

"The risks to real household spending from rising inflation are grossly overstated," said Kallum Pickering, senior U.K. economist at Berenberg, in a response to the retail sales.

"The rise in inflation will squeeze household incomes in 2017 and 2018 even as tight labor market conditions cause a modest rise in nominal wage growth. But it is unlikely to fully pass through into real consumption growth," he added.

Shares of Reckitt Benckiser Group PLC (RB.LN) fell 1.3%, Unilever PLC (ULVR.LN) (ULVR.LN) lost 0.2% and Hikma Pharmaceuticals PLC (HIK.LN) gave up 2.2%.

In other movers, Next PLC (NXT.LN) jumped 8.1% after the fashion retailer maintained its final dividend at GBP1.05 and confirmed its guidance for the current year (http://www.marketwatch.com/story/fashion-retailer-next-posts-drop-in-profit-2017-03-23).

Shares of Kingfisher PLC (KGF.LN) dropped 1.6%, building on a 5.1% slide from Wednesday when the home-improvement retailer flagged concerns about the uncertainty for the U.K. economy in the wake of the Brexit vote (http://www.marketwatch.com/story/kingfisher-profit-rises-chairman-to-retire-2017-03-22).

London attack: Eight people have been arrested (http://www.marketwatch.com/story/seven-arrested-in-six-raids-as-police-probe-london-terror-attack-2017-03-23) as police continue to investigate the attack in London on Wednesday.

An assailant on Wednesday afternoon mowed down pedestrians on Westminster Bridge, before breaking through barriers and into parameters of the Houses of Parliament. A police officer was stabbed and later died of his injuries. Two members of the public and the attacker have also been confirmed dead.

(END) Dow Jones Newswires

March 23, 2017 13:35 ET (17:35 GMT)

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