LONDON MARKETS: FTSE 100 Edges Up, With Banks Higher Ahead Of Inflation Data

By Carla Mozee, MarketWatch

U.K. inflation rate expected to top Bank of England's target

U.K. stocks clung to small gains Tuesday, with bank shares rising ahead of an update on British inflation that may break above the Bank of England's target.

The FTSE 100 edged up 0.1% at 7,433.42. Financial, oil and gas and industrial shares rose, but mining, health care and tech stocks declined. The blue-chip gauge on Monday closed a choppy session (http://www.marketwatch.com/story/ftse-100-slips-as-the-pound-hits-3-week-high-2017-03-20) by rising 0.1% at 7,429.81, enough to notch an all-time closing high.

Bank shares were among those moving higher ahead of the U.K. inflation data, as expectations grew that the headline rate will top the Bank of England's 2% target for the first time since 2013.

Barclays PLC (BCS) (BCS) rose 1.3%, Lloyds Banking Group PLC (LLOY.LN) (LLOY.LN) was up 0.8%, and Royal Bank of Scotland PLC shares (RBS.LN) (RBS.LN) picked up 0.5%.

Standard Chartered PLC (STAN.LN) gained 0.6%, while HSBC (HSBA.LN) (HSBA.LN) (HSBA.LN) rose by a more modest 0.3%.

Inflation reading: A rise in inflation is likely to put more pressure on the Bank of England to lift its key interest rate from the record low 0.25%. Last week, the bank voted 8-1 to leave the rate steady (http://www.marketwatch.com/story/boe-holds-rates-but-takes-hawkish-tone-2017-03-16), but board member Kristen Forbes wanted a rate rise to stay ahead of inflationary pressures.

Consumer prices on an annual basis are expected to rise to 2.1% and core inflation is expected to increase to 1.7%. The headline rate will now account for owner-occupiers' housing costs.

Investec this week said it expects inflation to surpass the 3% rate over the summer. "But we do not expect the Monetary Policy Committee to respond by raising rates unless there is a material acceleration in pay rates, a scenario which data earlier this week suggest is unlikely for now," wrote Investec economist Philip Shaw.

Read:BOE chief Carney warns against giving into 'fatigue' for post-crisis reforms (http://www.marketwatch.com/story/bank-of-england-chief-warns-against-giving-into-fatigue-for-post-crisis-reforms-2017-03-17)

The February U.K. inflation report is due at 9:30 a.m. London time, or 5:30 a.m. Eastern Time, released by the Office for National Statistics.

Sterling edges up: The pound traded at $1.2364, up from $1.2357 late Monday in New York. Sterling on Monday rose above $1.24 the first time in three weeks, but was knocked down after the U.K. government said British Prime Minister Theresa May will trigger Article 50 on March 29 (http://www.marketwatch.com/story/uk-prime-minister-to-trigger-start-of-brexit-process-on-march-29-2017-03-20) to begin the process of leaving the European Union, known as "Brexit."

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

And see:The trouble brewing in Scotland for the U.K.'s Theresa May (http://www.marketwatch.com/story/distracted-by-the-continent-may-ignores-trouble-brewing-in-scotland-2017-03-21)

Stock movers: On the mid-cap FTSE 250 , shares of Bellway PLC (BWY.LN) gained 2.7% after the home builder said first-half pretax profit rose 9.3% (http://www.marketwatch.com/story/bellway-pretax-profit-rises-on-sales-growth-2017-03-21) on rising sales. (http://www.marketwatch.com/story/is-the-uk-headed-for-a-snap-election-this-year-bookies-are-more-certain-than-ever-2017-03-20)

(END) Dow Jones Newswires

March 21, 2017 05:10 ET (09:10 GMT)

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