By Carla Mozee and Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- The FTSE 100 index fell from its highest
level in more than 15 years on Wednesday, with losses fueled by a
drop for Vodafone as well as indications that the next Bank of
England move will be a rate hike.
The benchmark lost 0.2% to 6,883.21 after nudging its highest
closing level since December 1999 on Tuesday.
Hawkish BOE: The weakness came after a round of U.K.
labor-market data and the Bank of England's minutes from its Feb. 5
meeting. While policy makers voted unanimously to leave the key
interest rate at 0.5%, two of them said the decision was a "finely
balanced" call, and that "there may well be a case" for a rate
increase later in 2015.
Jobs data: Meanwhile, data showed U.K. unemployment dropped to
5.7% in the three months through December -- the lowest in almost
six years -- from 5.8% a month before. Salaries grew at the fastest
pace in a year and a half, a fresh sign that a long squeeze on
living standards is coming to an end.
The solid labor-market report provides the BOE with more
ammunition to eventually raise interest rates, which isn't
well-received by stock investors.
"Consistent with the Inflation Report press conference last
week, the minutes recognized the theoretical risks from low
inflation, but preferred to focus more fire on the boost to growth
that cheaper oil provides," said Rob Wood, chief U.K. economist at
Berenberg, in a note. "In our view, a deflationary spiral is
unlikely in the UK, especially given the tightening labor
market."
Sterling: The pound (GBPUSD) recaptured the $1.54 level against
the U.S. dollar after the arrival of U.K. labor-market data and the
BOE report. The pound was buying $1.5443, versus $1.5354 late
Tuesday.
Stocks: Vodafone Group PLC (VOD) added the most pressure on the
FTSE, down 2.6%. The wireless telecom company said chief technology
officer Stephen Pusey, who is retiring this summer, will join the
board of Centrica PLC .
Other decliners included Coca-Cola HBC AG , which fell 3.1%
after the bottler posted a decline in fourth-quarter net profit and
warned of a persistent volatile environment this year.
Tesco PLC (TSCDY) erased an earlier gain and fell 0.6%. Late
Tuesday, Britain's largest supermarket chain named John Allan as
its new chairman. His tenure will begin on March 1 as he takes over
from Richard Broadbent. The company is undergoing a sweeping
overhaul under the leadership of new chief executive, Dave
Lewis.
Allan currently serves as chairman of home builder Barratt
Developments PLC and deputy chairman of Dixons Carphone PLC .
Deutsche Bank on Tuesday upgraded Tesco to a buy rating from
hold, saying the company "has shown three months of improved sales
performance and the discounters share growth has slowed."
Greece: In an apparent softening of stance, Greece will seek a
six-month extension to its loan agreement on Thursday, an official
has said. The ECB will review its emergency liquidity assistance to
Greek banks, a program known as ELA, which it introduced earlier in
February.
See: Why the ECB's unlikely to cut off Greek banks' emergency
funds
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