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 08:17 ET (13:17 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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