LONDON MARKETS: U.K. Stocks Rise As Disappointing Inflation Eases Pressure On BOE To Hike

By Sara Sjolin, MarketWatch

Pound briefly drops below $1.42

U.K. stocks rose for a second straight day on Wednesday, moving higher after a disappointing reading on Britain's inflation reduced pressure on the Bank of England to raise interest rates next month.

Miners were among biggest advancers as metals prices rallied on concerns further sanctions against Russia could dent supply.

What are markets doing?

The FTSE 100 index climbed 1.3% to end at 7,317.34, logging its highest close since early February, according to FactSet data.

The pound dropped to $1.4220, down from $1.4290 late Tuesday in New York and falling from an intraday high of $1.4315. Sterling briefly dipped below $1.42 during Wednesday's session to an intraday low of $1.4173.

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 market?

The moves in both the pound and the FTSE came after data showed U.K. inflation fell to 2.5% in March (http://www.marketwatch.com/story/uk-inflation-cools-misses-forecasts-2018-04-18) from 2.7% in February. Analysts had expected consumer prices to have risen 2.7%.

The weaker reading is good news for households, but could give BOE Gov. Mark Carney a headache ahead of next month's policy-setting meeting. The market is still pricing in an interest-rate rise, but the fall in inflation could make an increase less of a done deal.

Sterling earlier this week jumped above $1.43 and reached its highest level since the Brexit vote in June 2016 on rising expectations the U.K. central bank will tighten policy. The pound, however, already started to unravel on Tuesday after data showed February wages including bonuses rose less than some had expected.

The gains on the U.K. stock market on Wednesday were also propelled by corporate news. Miners were among top performers, after Rio Tinto PLC (RIO.LN) (RIO.LN) (RIO.LN) said quarterly iron-ore exports from its Australian mines rose 5%. Shares of the mining major ended up 5.4%, also boosted by gains in metals prices.

What are strategists saying?

"The FTSE 100 has gone from the back of the pack to the market leader, as a sharp deterioration in U.K. inflation has driven the pound sharply lower," said Joshua Mahony, market analyst at IG, in a note.

"The outperformance of the pound has certainly been one of the main determinants of FTSE 100 underperformance among European bourses, yet with GBPUSD falling almost 100 points in the wake of today's inflation figures, we are finally seeing the FTSE benefit from the pound's performance," he added.

Read:Embrace these 5 unloved investments, says Morningstar (http://www.marketwatch.com/story/embrace-these-5-unloved-investments-says-morningstar-2018-04-18)

What stocks are in focus?

Among miners on the rise, shares of Glencore PLC (GLEN.LN) added 7.7%, Anglo American PLC (AAL.LN) climbed 6.2% and BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) put on 5.5%.

Mediclinic International PLC (MDC.LN) rallied 9.2% after the health-care company said it expects full-year results marginally ahead of expectations.

Oil companies were also rising, tracking a more-than 2% jump in oil prices (http://www.marketwatch.com/story/oil-prices-rise-on-optimism-ahead-of-us-supply-data-2018-04-18) that came after a surprise decline in weekly U.S. crude supplies. Shares of BP PLC (BP.LN) (BP.LN) climbed 2.6% and Royal Dutch Shell PLC (RDSA.LN)(RDSA.LN) put on 2.4%.

Outside the FTSE 100, CYBG PLC (CYBG.LN) shares slid 5% after the owner of Clydesdale and Yorkshire Bank said it expects to set aside another GBP350 million (http://www.marketwatch.com/story/cybg-to-raise-ppi-provision-capital-position-hit-2018-04-18) ($501 million) for legacy claims over mis-sold payment-protection insurance. The increased provisions would bring its capital position below its guidance range.

Intu Properties PLC (INTU.LN) gave up 4.1%, after Hammerson PLC (HMSO.LN) said it's abandoning plans to buy (http://www.marketwatch.com/story/hammerson-withdraws-intu-buy-recommendation-2018-04-18) the shopping center owner in the face of a weak U.K. retail market. Intu responded (http://www.marketwatch.com/story/intu-reacts-to-hammerson-ditching-takeover-bid-2018-04-18) by saying Hammerson's reasons for dropping the approach were "unsatisfactory." Hammerson shares ended up 4.2%.

(END) Dow Jones Newswires

April 18, 2018 12:17 ET (16:17 GMT)

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