LONDON MARKETS: U.K. Stocks Finish At 10-week High As Metals Prices Rally

By Sara Sjolin, MarketWatch

Shire soars; pound seesaws as U.K. retail sales disappoint

U.K. stocks extended their win streak to three sessions on Thursday, boosted by gains for miners on a rally in nickel and aluminum prices.

The British pound initially declined after a disappointing reading on U.K. retail sales, but later bounced back somewhat to trade near $1.42.

What are markets doing?

The FTSE 100 index edged up 0.2% to end at 7,328.92, building on a 1.3% rally from Wednesday (http://www.marketwatch.com/story/miners-lead-ftse-100-higher-after-rio-tinto-update-inflation-data-in-focus-2018-04-18). The London benchmark notched its highest close since Feb. 5, or more than 10 weeks ago.

The pound dropped to an intraday low of $1.4162, but rebounded to trade recently at $1.4185. Sterling bought $1.4205 late Wednesday in New York.

A weaker pound tends to prop up the British blue-chip index, as its multinational companies generate most of their sales in foreign currencies.

What is driving the markets?

A continued rally in oil and metals helped lift the FTSE 100, which is heavily skewed toward the commodity sector.

Nickel prices were trading at their highest since 2014, up around 15% so far this week. They were getting a lift from concerns that Russian nickel producer Norilsk Nickel (http://www.marketwatch.com/story/nickel-prices-rally-to-a-3-year-high-on-growing-concerns-over-us-sanctions-on-russia-2018-04-18) will be included in U.S. sanctions on Moscow.

Sanctions on major Russian aluminum producer United Co. Rusal (0486.HK) are seen as having helped lift aluminum prices to their highest level in more than six years. The metal was continuing its rally on Thursday.

Oil prices were also rising sharply. Brent futures added more than 1% and were trading at the highest level since 2014 (http://www.marketwatch.com/story/oil-hovers-at-3-12-year-high-as-investors-look-ahead-to-opec-meeting-2018-04-19), boosted by U.S. supply data out on Wednesday. Oil traders were looking ahead to the outcome of the joint Organization of the Petroleum Exporting Countries and non-OPEC ministerial monitoring committee meeting, expected to be held on Friday.

Which data are in focus?

Data from the Office for National Statistics showed retail sales dropped 1.2% in the U.K. in March, month-on-month. Analysts had forecast a 0.4% decline, according to FactSet. The reading comes on the heels of disappointing wage and inflation data published earlier in the week, which were seen as easing pressure on the Bank of England to hike rates more than once this year.

What are strategists saying?

"After a near-two-week pause following a rally from the March low, the FTSE 100 has finally broken out of a frustratingly tight 130-point range to hit a 10-week high. With renewed momentum, and right in the middle of historically the second-best month of the year for stock markets, 7,400 is a realistic possibility," said Lee Wild, head of equity strategy at Interactive Investor, in a note.

"A modest unraveling of sterling's latest advance against the dollar is a clear boon for U.K.-listed overseas earners, and a strong start to U.S. results season is steering focus back from politics to market fundamentals. That's positive for stocks while data points to rapid growth both in earnings and the global economy," he said.

Which stocks are in focus?

Shares of Shire PLC (SHPG) (SHPG) jumped 5.9%, on course for their best session in three weeks, after the drugmaker rejected a $60 billion takeover bid from Japan's Takeda Pharmaceutical Co (http://www.marketwatch.com/story/shire-takeda-bid-undervalues-growth-prospects-2018-04-19). (4502.TO)(4502.TO) but said the two sides are still in talks. Separately, Allergan PLC (AGN) said it's in the "early stages" of a possible bid for Shire.

British American Tobacco PLC (BATS.LN) and Imperial Brands PLC (IMBBY)dropped 5.4% and 2.9%, respectively, alongside a slide in rival Philip Morris International Inc. (PM) after the company's first-quarter revenue fell short of expectations (http://www.marketwatch.com/story/philip-morris-tops-profit-estimates-but-revenue-falls-short-2018-04-19).

Rentokil Initial PLC (RTO.LN) posted one of the biggest gains in the FTSE 100, up 4.5%. The advance came after the pest control company said ongoing revenue--which excludes the effects of disposed or closed businesses--rose 11% (http://www.marketwatch.com/story/rentokil-revenue-down-on-hurricane-cold-weather-2018-04-19) in the first quarter.

Among miners, shares of Russia-focused Evraz PLC (EVR.LN) gained 1.6%, while those for Glencore PLC (GLEN.LN) shares added 1%.

Among oil giants, BP PLC shares (BP.LN) (BP.LN) advanced by 1.4%, and Royal Dutch Shell (RDSA.LN) (RDSA.LN) tacked on 1.9%.

Unilever PLC's stock (ULVR.LN) (ULVR.LN) was down 2.2% after the maker of Dove soap and other consumer products said first-quarter revenue fell 5.2% (http://www.marketwatch.com/story/unilever-to-launch-6-billion-share-buyback-2018-04-19) on adverse currency movements and the impact of disposals. The company also said it is starting a share buyback program of up to 6 billion euros ($7.43 billion).

Weir Group PLC shares (WEIR.LN) rose 6.2% on the FTSE 250 . The engineering company said it is purchasing U.S.-based ESCO Corp. in a $1.05 billion deal (http://www.marketwatch.com/story/weir-to-buy-esco-in-105-billion-deal-2018-04-19) that Weir says will strengthen its mineral and oil-and-gas offerings.

Outside the main indexes, Debenhams PLC's stock (DEB.LN) lost 5.7% after the department-store chain reported an 85% drop in first-half pretax profit (http://www.marketwatch.com/story/debenhams-pretax-profit-plunges-85-2018-04-19). The company said its Chief Financial Officer Matt Smith will leave the company to become finance director at Selfridges & Co.

(END) Dow Jones Newswires

April 19, 2018 12:10 ET (16:10 GMT)

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