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UKX FTSE 100 Index

7,957.12
25.14 (0.32%)
Last Updated: 13:29:16
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
  25.14 0.32% 7,957.12 7,975.04 7,931.36 7,931.98 0 13:29:16

LONDON MARKETS: FTSE 100 Falls After May Loses Key Brexit Vote; BOE Holds Rate Steady

14/12/2017 1:31pm

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By Sara Sjolin and Carla Mozee, MarketWatch

U.K. retail sales leap in November; Sky shares fall as 21st Century Fox strikes Disney deal

U.K. stocks declined on Thursday, as traders digested a defeat for the government's Brexit bill. The setback for British Prime Minister Theresa May is seen as potentially opening the way to a softer U.K. exit from the European Union.

Blue-chip stocks remained lower after the Bank of England met widely held expectations and left its benchmark interest rate unchanged. Ahead of that, data showed a jump in monthly British retail sales.

What markets are doing: The FTSE 100 index was down 0.3% at 7,478.03, with industrial, utility and consumer-related shares falling the most. But the basic materials sector was the best performing. On Wednesday, the index fell 0.1% (http://www.marketwatch.com/story/ftse-100-wavers-around-5-week-high-with-uk-jobs-update-on-deck-2017-12-13).

The pound fell to $1.3429 after the Bank of England issued its last policy decision for 2017. Sterling late Wednesday bought $1.3419. Against the euro, sterling traded hands at EUR1.1347, steady from Wednesday.

The 10-year gilt yield rose 2 basis points to 1.19%, according to Tradeweb. Yields rise when prices fall.

What's driving markets: Brexit was a major focus for Thursday's trade after May's government late Wednesday was defeated in a key parliamentary vote on legislation for the U.K. divorce from the EU.

The U.K.'s lower house voted to amend the Brexit bill to give members of parliament the power to reject the final divorce deal struck with Brussels. The government had warned that the measure could jeopardize a smooth exit from the EU in March 2019.

The vote--which was an amendment to May's flagship Brexit bill--came after a rebellion of 11 members of her own Conservative Party, and is seen as a potential route to a softer Brexit.

The pound slipped after the vote (http://www.marketwatch.com/story/british-pound-slips-as-uk-parliament-votes-to-change-brexit-plan-2017-12-13) on Wednesday, but bounced back early on Thursday.

The setback for the government comes just as EU leaders--including May--meet in Brussels on Thursday and Friday for a summit where Brexit features high on the agenda. The group is expected to give the green light for divorce talks to move onto the second phase (http://www.marketwatch.com/story/breakthrough-on-brexit-terms-opens-way-to-next-phase-of-talks-2017-12-08).

Central bank day arrives: The BOE in a 9-0 vote left its key interest rate at 0.5%, meeting widely held expectations after the central bank in November raised the rate for the first time in a decade. "The recent news in the macroeconomic data has been mixed and relatively limited. Global growth has remained strong. Domestically, some activity indicators suggest GDP growth in Q4 might be slightly softer than in Q3," the BOE said in a statement.

The European Central Bank also left its monetary policy unchanged (http://www.marketwatch.com/story/ecb-leaves-rates-at-record-low-reiterates-dovish-guidance-2017-12-14). ECB President Mario Draghi will hold a news conference at 1:30 p.m. London time, or 8:30 a.m. Eastern. On Wednesday, the Federal Reserve lifted interest rates (http://www.marketwatch.com/story/at-her-final-press-conference-yellen-grades-her-tenure-at-the-fed-2017-12-13) for the third time this year in a widely expected move.

Read:3 things to watch for at Thursday's ECB meeting (http://www.marketwatch.com/story/3-things-to-watch-for-at-thursdays-ecb-meeting-2017-12-13)

What are strategists saying: "As this Brexit-related uncertainty is almost certainly here to stay, I expect the [BOE] to proceed cautiously from here. Policy makers will naturally be keen to raise rates as fast as the economy allows, if only to provide some firepower when the next economic downturn arrives," Ben Brettell, senior economist at Hargreaves Lansdown, in a note.

"But with domestic inflationary pressures thin on the ground and Brexit casting its customary shadow, there's no real imperative to move for some time. Markets are tentatively pricing in a further rise towards the second half of next year."

What's new in economics: The pound hit an intraday high of $1.3467 after the Office for National Statistics said November retail sales rose 1.1% month-over-month, (http://www.marketwatch.com/story/black-friday-helps-boost-uk-retail-sales-2017-12-14) and by 1.6% year-over-year. Those figures outstripped expectations of 0.4% and 0.3%, respectively, in a FactSet survey of analysts.

Customers picking up household appliances and other goods during Black Friday events helped bolster sales, said the ONS.

The report wraps up a busy week of U.K. government economic data. Earlier this week, the ONS said Britons' wages adjusted for inflation (http://www.marketwatch.com/story/uk-wages-fall-again-in-ongoing-consumer-squeeze-2017-12-13) fell 0.4% in the three months to October, the eight consecutive month of declines. Consumer price inflation hit a 3.1% annual rate (http://www.marketwatch.com/story/uk-inflation-hits-almost-6-year-high-2017-12-12) in November, the highest since March 2012.

BOE Gov. Mark Carney's letter to U.K. finance minister Philip Hammond explaining why inflation is more than 1% above the bank's 2% target will be released in February, alongside minutes from the bank's policy meeting and its Quarterly Inflation report.

Stock movers: Sky PLC (SKY.LN) fell 1.4% after the broadcaster's largest shareholder, 21st Century Fox Inc. (FOX), agreed to sell most of its assets to Walt Disney Co. (DIS) in a deal that valued at about $52.4 billion (http://www.marketwatch.com/story/disney-to-buy-21st-century-fox-in-a-deal-valued-at-524-billion-2017-12-14).

In a statement, 21st Century Fox said it "remains committed to completing its proposed acquisition of the shares in Sky it does not own, and anticipates that the acquisition of Sky will close by June 30, 2018."

Shares of retailers were largely lower even after the strong U.K. sales report. Marks and Spencer shares (MKS.LN) were down 0.3% and Next PLC (NXT.LN) was off 0.8%. Associated British Foods PLC (ABF.LN), which runs fast-fashion company Primark, fell 0.4%. But DIY retailer Kingfisher PLC (KGF.LN) turned higher and rose 0.7% and

Shares of Lonmin PLC (LMI.LN) jumped 21% on the midcap FTSE 250 after South Africa's Sibanye-Stillwater (SGL.JO) said it'll buy the UK.-listed struggling miner (http://www.marketwatch.com/story/lonmin-agrees-to-takeover-by-sibanye-stillwater-2017-12-14) for about GBP285 million ($382.83 million).

Fellow precious metals miner Randgold Resources Ltd. (RRS.LN) (RRS.LN) climbed 1.8% on the FTSE 100 as gold prices climbed 0.7% (http://www.marketwatch.com/story/gold-climbs-after-fed-sticks-to-3-rate-hikes-next-year-2017-12-14).

Capita PLC (CPI.LN) slid 12% after a trading update (http://www.marketwatch.com/story/capita-sees-2017-in-line-bids-wont-add-to-profit-2017-12-14).

 

(END) Dow Jones Newswires

December 14, 2017 08:16 ET (13:16 GMT)

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

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