LONDON MARKETS: U.K. Stocks Hang Onto All-time High With BOE Hearing In Focus
May 22 2018 - 5:43AM
Dow Jones News
By Sara Sjolin, MarketWatch
Pound moves slightly higher
U.K. stocks struggled for direction on Tuesday, a day after
scoring an all-time closing high, as traders waited for fresh
catalysts to give the market a kick.
The pound rebounded from its 2018 low as several Bank of England
members -- including Governor Mark Carney -- appeared at a hearing
on inflation and monetary policy before lawmakers.
What are markets doing?
The U.K.'s FTSE 100 index gained 0.1% to 7,864.14, on track for
a fresh record close. The London benchmark on Monday ended at an
all-time high after taking out its previous closing high of
7,787.97, hit last Thursday.
The pound rose to $1.3472, from $1.3426 late Monday in New York.
Sterling on Monday fell to its lowest level since late
December.
What is driving the market?
Trading was subdued on Tuesday, as investors paused after
pushing the London benchmark to a fresh record in the prior
session. A major factor in the recent stock rally was the weakening
pound, which slumped on the back of a rising dollar and fears over
government infighting over Brexit.
The cabinet remains divided over whether the U.K. should remain
in something similar to a customs union with the European Union to
avoid a "hard" border in Ireland. The bitter row has spurred some
Conservative MPs to reportedly push for an out-of-cycle election in
the U.K. to break the negotiation deadlock and potentially oust
Prime Minister Theresa May
However, Foreign Secretary Boris Johnson late Monday spoke out
against holding a "snap" general election and said he stands by
May. Johnson has been very vocal in his opposition to a customs
union, whereas May has indicated her willingness to compromise to
avoid a hard border in Ireland.
What is on Tuesday's agenda?
Carney and three other BOE members were speaking at a Treasury
Select Committee hearing that kicked off at 10 a.m. London time, or
5 a.m. Eastern Time.
The central bank boss defended his stance from the quarterly
inflation report that rates won't rise until the U.K. economy is
stronger.
Taking on a slightly more hawkish view, policy maker Gertjan
Vlieghe said rates could rise as much six times in the next three
years based on his forecast for inflation and economic growth.
What are strategists saying?
"We suspect that [the BOE hearing] will not bring any major new
revelations about the monetary policy outlook in the U.K., with
Carney likely to reiterate that some degree of policy tightening --
about three [interest rate] hikes of 25bps apiece over the coming
three years -- will be required if the economy performs in line
with their expectations," analysts at Daiwa Capital Markets said in
a note.
Stock movers
Shares of National Grid PLC (NG.LN) fell 0.6% after the U.K.
energy regulator Ofgem said it has opened an investigation
(http://www.marketwatch.com/story/ofgem-to-probe-national-grid-unit-over-forecasts-2018-05-22)
into the company's forecasting on the electricity market.
Outside the FTSE 100, Halfords Group PLC (HFD.LN) slumped 12%
after the retailer of motoring and cycling products said fiscal
2018 pretax profit declined 6%
(http://www.marketwatch.com/story/halfords-2018-profit-falls-on-weak-pound-2018-05-22)
due to currency headwinds.
(END) Dow Jones Newswires
May 22, 2018 06:17 ET (10:17 GMT)
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