LONDON MARKETS: FTSE 100 Ends Slightly Lower, Suffers First Weekly Drop In 7 Weeks
January 20 2017 - 11:02AM
Dow Jones News
By Carla Mozee and Victor Reklaitis, MarketWatch
Retail sales drop in December; traders track Trump
inauguration
U.K. stocks ended slightly lower Friday, breaking a string of
weekly wins, with investors waiting to hear what Donald Trump may
say about his economic plans as he's sworn in as the U.S.'s 45th
president.
The FTSE 100 closed down 0.1% at 7,198.44, after earlier
managing to turn slightly higher as the British pound dropped in
the wake of a downbeat update on retail sales activity in December.
A weaker pound can help multinational companies as their products
can become less expensive to buy for overseas investors. Also,
earnings made overseas are boosted when translated back into
sterling terms.
Caution appeared to set in ahead of Trump's inauguration in
Washington, D.C. The swearing-in ceremony was starting as London
trade wrapped up, at 4:30 p.m. London time, or 11:30 a.m. Eastern
Time.
See:MarketWatch's live blog and video of Trump's inauguration
(http://blogs.marketwatch.com/capitolreport/2017/01/20/donald-trump-to-be-inaugurated-as-45th-president-live-blog-and-video/)
And read:What time is the inauguration?
(http://www.marketwatch.com/story/when-is-the-inauguration-2017-01-17)
Investors worldwide will look for "confirmation that he plans to
follow through with his pre-election rhetoric and push massive
fiscal stimulus through Congress, as well as easing regulatory
burdens," which could reignite the dollar's postelection rally,
Charalambos Pissouros, senior analyst at IronFX Global Ltd., said
in a note.
For the week, the FTSE 100 endured a fall of 1.9%, after
climbing for six weeks in a row. On Monday, the benchmark broke a
14-day winning streak
(http://www.marketwatch.com/story/ftse-100-notches-small-gain-as-pound-slides-on-hard-brexit-fears-2017-01-16),
the longest on record for British blue chips. That string of gains
also contained 12 consecutive all-time closing highs.
Part of the FTSE's 100 loss this week stemmed from Tuesday's
rally in the pound. During trading that day, sterling surged nearly
3% against the dollar after U.K. Prime Minister Theresa May said
terms of the final Brexit deal negotiated between U.K. and EU
officials would be put to a vote in the British parliament.
If Trump during his inauguration speech "avoids the crucial
topics of fiscal and regulatory reforms once again, or if his
stance towards them seems less confident than preelection, the
dollar could resume its downward correction, as investors become
increasingly impatient regarding the absence of details on the
nation's fiscal direction," Pissouros said.
Banking shares globally have been among the beneficiaries of a
post-election rally, on expectations the industry may enjoy a more
relaxed regulatory environment during a Trump administration.
In London trade Friday, Lloyds Banking Group (LLOY.LN) (LLOY.LN)
shares closed up 0.5% and Royal Bank of Scotland PLC (RBS.LN)
(RBS.LN) was higher by 0.4%.
Pound and data: On Friday, the pound dropped to $1.2287 after
data showed U.K. retail sales fell 1.9% in December
(http://www.marketwatch.com/story/uk-retail-sales-slow-at-fastest-rate-since-2012-2017-01-20)
month-over-month, missing expectations for rise of 0.2%, according
to FactSet. Sales slowed at the fastest rate since 2012. Sales in
December year-over-year rose 4.3%, but that missed expectations for
growth of 7.3%.
The pound bought $1.2327 ahead of the release, and changed hands
late Thursday at $1.2299. It was recently at $1.2330.
"It seems trading volumes in December could not live up to the
levels around Black Friday in November, which was expected, but it
was surprise just how big a drop we've seen," wrote Craig Erlam,
senior market analyst at Oanda.
"While sales were still massively up on last year, it will be
interesting to see whether higher prices lead to a more sustained
decline in consumer appetite or whether the impressive earnings
growth we've seen ensures a swift rebound in the coming months," he
said.
Other movers: Whitbread PLC (WTB.LN) rose 1.2% following a
ratings upgrade to equalweight from underweight at Barclays. The
company behind the Costa Coffee and Premier Inn hotel chains is
slated to release third-quarter earnings on Thursday.
Next week, there will be a pickup in the amount of financial and
trading updates from London-listed companies.Among them, updates
are due from easyJet PLC (EZJ.LN) , miner BHP Billiton PLC (BLT.LN)
(BHP.AU) (BHP.AU) and Johnnie Walker scotch maker Diageo PLC (DEO)
.
(END) Dow Jones Newswires
January 20, 2017 11:47 ET (16:47 GMT)
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