LONDON MARKETS: FTSE 100 Slumps 1% As Fed Signals Faster Pace Of Rate Hikes
February 22 2018 - 3:20AM
Dow Jones News
By Carla Mozee, MarketWatch
Barclays to raise dividend, shares jump
U.K. stocks dropped Thursday, with broad-based losses appearing
after Federal Reserve meeting minutes suggested policy makers will
raise U.S. borrowing rates at a faster-than-expected pace.
The losses came ahead of a second reading on U.K. gross domestic
product for the fourth quarter. Among the market's few advancers
was banking heavyweight Barclays PLC after the release of its
financial results.
How markets are moving
The FTSE 100 indexfell 1.2% to 7,196.67, with just roughly 10 of
its components advancing. The consumer goods and tech sectors were
down the most. On Thursday, the benchmark rose 0.5%
(http://www.marketwatch.com/story/ftse-100-slips-as-gains-for-lloyds-glencore-fail-to-spread-cheer-2018-02-21).
The poundbought $1.3893, down from $1.3919 late Wednesday in New
York.
The yield on the 10-year gilt rose 1 basis point to 1.56%,
according to Tradeweb. Yields rise when prices fall.
Check out: More investors looking to cut U.K. assets as Brexit
uncertainty persists
(http://www.marketwatch.com/story/more-investors-looking-to-cut-uk-assets-as-brexit-uncertainty-persists-2018-02-16)
What's driving markets
Investors yanked down U.K. and European equities in the wake of
a selloff on Wall Street and as U.S. stock futures slumped early
Thursday
(http://www.marketwatch.com/story/dow-futures-slide-more-than-100-points-as-fed-driven-jitters-persist-2018-02-22).
U.S. stocks retreated from a rally Wednesday
(http://www.marketwatch.com/story/dow-futures-inch-lower-as-investors-brace-for-fed-minutes-2018-02-21)
after minutes of the Fed's January meeting
(https://www.federalreserve.gov/monetarypolicy/fomcminutes20180131.htm)
showed officials altered their message to point to "further gradual
increases," underscoring their desire to resume rates increases in
2018 as officials foresee the economy getting stronger than it was
at the end of 2017. The S&P 500 closed Wednesday lower by 0.6%,
giving up an intraday gain of 1.2%.
The prospect of more rate hikes in the pipeline sent bond yields
rising, as prices fall, and the U.S. dollar higher. That move
pressured prices of dollar-denominated commodities such as copper ,
gold and oil and in turn shares of metals and oil producers. Shares
of oil giant Royal Dutch Shell PLC (RDSB.LN) fell 0.8%.
Economic data
The second reading of U.K. GDP growth is widely expected to
remain at 1.5% for the last three months of 2017. The Office for
National Statistics is slated to release the report at 9:30 a.m.
London time, or 4:30 a.m. Eastern Time.
What strategists are saying
"That stock markets remain in a volatile state is perfectly
illustrated by the latest session on Wall Street. Just as it seemed
traders had acclimatized to inflation, rising interest rates and
higher bond yields, the fears that caused this month's crash were
reignited by minutes from the Federal Reserve's last meeting," said
Lee Wild, Interactive Investors's head of equity strategy, in a
note.
"We've known for some time that U.S. policy makers might squeeze
in extra rate hikes in 2018, so it's possible this new sell-off is
just a knee-jerk reaction to the minutes. However, the Fed must
prevent [U.S. President Donald] Trump's pro-business reforms
overheating the U.S. economy, and there's risk here that central
bankers mismanage the rate-hike cycle," said Wild.
Stock movers
Barclays shares (BCS) surged 5.7% after the bank said it would
more than double its dividend next year
(http://www.marketwatch.com/story/barclays-swings-to-loss-vows-to-double-dividend-2018-02-22-34852558)
even as the bank swung to a full-year loss of GBP1.9 billion ($2.64
billion).
Anglo American PLC shares (AAL.LN) dropped 3.3% after the miner
posted 2017 net profit of $3.17 billion
(http://www.marketwatch.com/story/anglo-american-profit-almost-doubles-in-2017-2018-02-22),
missing the $3.25 billion consensus estimate from FactSet.
British American Tobacco PLC (BATS.LN) fell 4.5%. The producer
of brands including Lucky Strike and Dunhill cigarettes said that
pretax profit increased more than fourfold in 2017 but noted that
total group cigarette and tobacco-heated products on an organic
basis fell 2.6%. The company said figure was better than an
estimated industry declined by around 3.5%.
(END) Dow Jones Newswires
February 22, 2018 04:05 ET (09:05 GMT)
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