By Carla Mozee, MarketWatch
Kingfisher shares slide; U.K. wages data lift hopes for BOE rate
rise
U.K. stocks finished lower Wednesday, with investors seen as
wary of taking on risky bets before they find out whether the Fed
is ushering in another interest-rate hike.
A stronger pound also weighed on stocks, pushed higher after
U.K. wage data bolstered the case for a rate hike by the Bank of
England.
Retailers were among the worst performers on the London
benchmark, after a downbeat view on the U.K. from home-improvement
chain Kingfisher PLC, sending its shares sliding by the most since
September 2001, according to FactSet data.
How markets moved
The FTSE 100 index fell 0.3% to end at 7,038.97, led lower by
the consumer goods and services sectors. But commodity-related and
utility stocks moved up. On Tuesday, the index ended 0.3%
(http://www.marketwatch.com/story/ftse-100-rises-off-15-month-low-ahead-of-inflation-data-2018-03-20)
higher.
The pound climbed to $1.4066 from $1.3999 late Tuesday in New
York. Sterling has risen about 0.8% against the greenback so far
this week, and by roughly 1% against the euro .
What drove markets
The marquee event for global markets is the Fed's policy
decision, and markets have priced in expectations that it will
raise its benchmark rate by a quarter-percentage point. Investors
are watching for hints the U.S. central bank may hike rates four
times this year, compared with the three seen.
The Fed's monetary policy tends to drive financial markets
globally, as many companies do business in the word's largest
economy and it can lift borrowing rates for them. The decision is
due at 2 p.m. Eastern Time, or 6 p.m. London time. New Fed Chairman
Jerome Powell will hold his first post-announcement press
conference at 2:30 p.m. Eastern.
Take a look:5 things to watch from the Fed decision
(http://www.marketwatch.com/story/5-things-to-watch-from-the-fed-decision-2018-03-19)
Government figures released Wednesday showed U.K. core wages
grew by 2.6% in January
(http://www.marketwatch.com/story/uk-wage-growth-accelerates-in-january-2018-03-21),
from 2.5% previously. Investors were looking for a solid reading to
help prompt the Bank of England to raise interest rates in May,
after data on Tuesday showed inflation was lower than expected in
February. The Bank of England's policy statement is due Thursday at
12 p.m. London time.
The pound gained after the release of the labor data. A stronger
pound can hurt stocks on the FTSE 100, as about 75% of revenue for
its multinational components is made overseas.
Read:The pound's post-transition deal bounce might not be here
to stay
(http://www.marketwatch.com/story/the-pounds-post-transition-deal-bounce-might-not-be-here-to-stay-2018-03-19)
What strategists are saying
"While not currently in the Fed's guidance, just four votes are
required for the Federal Open Market Committee to take a more
hawkish stance," said Mike van Dulken, head of research at Accendo
Markets.
"Furthermore, with Powell championing greater central banker
'transparency', he could surprise by announcing more regular press
conferences (outside the usual quarterly), opening the door for
more flexibility on hike timing and thus the full four increases
this year," he said in a note.
"It has been a good week for the pound with the confirmation of
a transition agreement on Brexit and now hard data supportive of a
hawkish BOE," said Phil McHugh, chief market analyst at Currencies
Direct, in a note.
"We expect to see the next BOE rate hike as early May followed
by further gradual hikes. We have been used to seeing the pound on
the back-foot mainly down to Brexit headwinds but there is now a
much stronger case to buy the pound," McHugh said.
Stock movers
Kingfisher PLC shares (KGF.LN) tumbled 10.7% as the company
behind the Screwfix and B&Q stores posted a 10% drop in fiscal
2018 pretax profit, and said there's been a mixed performance in
key markets.
(http://www.marketwatch.com/story/kingfisher-2018-profit-falls-10-2018-03-21)
"The U.K. is more uncertain, France is encouraging yet volatile,
whilst the market in Poland remains supportive," said Kingfisher
CEO Véronique Laury.
Shares of other U.K.-based retailers fell alongside Kingfisher.
Associated British Foods PLC (ABF.LN) , whose operations include
fast-fashion company Primark, fell by 3.1%, and Whitbread PLC
(WTB.LN), which runs Costa Coffee and Premier Inn Hotels, lost
3.%.
Next PLC (NXT.LN) , which sells apparel and home furnishings,
gave up 2.6%, and Marks & Spencer Group PLC (MKS.LN) moved down
0.8%.
Adding to the gloomy sentiment, apparel retailer New Look will
cut 1,000 jobs and close 60 stores following approval by creditors
for the company's restructuring plan, according to a BBC report
(http://www.bbc.co.uk/news/business-43486521). Data on U.K. retail
sales in February are due Thursday at 9:30 a.m. London time, ahead
of the Bank of England's statement.
Topping FTSE 100 advancers, steel maker Evraz PLC (EVR.LN)
bulked up 3.4% and copper miner Antofagasta PLC (ANTO.LN) ended
2.9% higher.
On the economic docket
The Office for National Statistics also said U.K. average weekly
earnings excluding bonuses rose 2.8%. That was above an expected
2.6% rate in a FactSet survey of analysts.
The unemployment rate fell in January to a four-decade low of
4.3%, the ONS said. It was expected to hold at 4.4%.
Check out:Brexit hard-liners fling fish into River Thames in
bizarre protest
(http://www.marketwatch.com/story/brexit-hard-liners-fling-fish-into-river-thames-in-bizarre-protest-2018-03-21)
(END) Dow Jones Newswires
March 21, 2018 13:28 ET (17:28 GMT)
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