LONDON MARKETS: FTSE 100 Drops After Rising Bond Yields Spur Selloff On Wall Street
25 April 2018 - 5:11PM
Dow Jones News
By Carla Mozee, MarketWatch
Sky shares up on Comcast bid; Whitbread to spin off Costa
Coffee
U.K. stocks dropped Wednesday, with the blue-chip market's
winning streak risk after elevated U.S. bond yields triggered a
selloff on Wall Street and pressured equity markets worldwide.
But Sky PLC was a standout after landing a more than GBP20
billion takeover bid from Comcast Corp.
How markets are performing
The FTSE 100 index fell 0.9% to 7,360.21, led by losses for
basic materials shares. The London benchmark on Tuesday rose 0.4%
(http://www.marketwatch.com/story/ftse-100-looks-for-6th-win-as-oil-shares-rise-pound-falls-2018-04-24),
a sixth consecutive gain that marked the longest winning streak
since mid-May 2017, according to FactSet data. Tuesday's closing
level was the highest since early February.
The pound bought $1.3934, down from $1.3978 late Tuesday in New
York. In the fixed-income market, the yield on the 10-year gilt
rose less than 1 basis point to 1.55%, according to Tradeweb. But
that yield has been moving around two-month highs.
Read:Here's the threat to the stock market from rising bond
yields
(http://www.marketwatch.com/story/heres-the-threat-to-the-stock-market-from-rising-bond-yields-2018-04-24)
What's driving the market
U.K., European and Asian stock markets took their cues from a
slide in U.S. stocks on Tuesday
(http://www.marketwatch.com/story/dow-shapes-up-to-break-losing-streak-but-earnings-could-kill-the-buzz-2018-04-24),
and U.S. stocks extended losses during Wednesday's session
(http://www.marketwatch.com/story/stock-selloff-set-to-continue-as-10-year-yield-blows-further-past-3-2018-04-25).
U.S. stocks were hit after the U.S. 10-year Treasury yield
climbed to the psychologically important 3% level for the first
time in four years, and that yield held above 3% on Wednesday
(http://www.marketwatch.com/story/us-10-year-yield-blasts-further-past-3-flirts-with-highest-since-2011-2018-04-25).
Meanwhile, industrial stocks were shaken as construction equipment
maker Caterpillar Inc. (CAT) said the first quarter was likely the
"high watermark" for the year
(http://www.marketwatch.com/story/caterpillar-shares-reverse-gains-to-slide-6-after-cfo-says-q1-was-peak-for-the-year-2018-04-24).
Also, 3M Co. (MMM) trimmed its full-year outlook
(http://www.marketwatch.com/story/3ms-stock-tumbles-into-a-bear-market-after-most-disappointing-results-in-over-a-decade-2018-04-24).
U.S. bond yields have been rising on expectations that
inflationary pressures could prompt the Federal Reserve to ramp up
the pace of rate hikes, which would increase borrowing costs for
companies and consumers. U.K. and European bond yields have also
been creeping upward. Higher yields can weigh on stocks as bonds
start to offer better returns than equities.
Investors in the U.K. and Europe will tune into what the
European Central Bank will say about economic growth in the
eurozone on Thursday when the bank releases its monetary policy
decision.
See:4 outcomes for the ECB meeting, in 1 handy chart
(http://www.marketwatch.com/story/4-scenarios-for-the-ecb-meeting-on-thursday-in-one-handy-chart-2018-04-24)
Check out:Why the premium for German bonds over Treasurys is the
widest in 30 years
(http://www.marketwatch.com/story/why-the-premium-for-owning-german-bonds-over-treasurys-is-at-the-widest-in-30-years-2018-04-23)
What are strategists saying?
"We are in the midst of earnings season, which continues to be
strong, but the market appears to be fully priced and in this
environment of sharply rising bond yields, the fear is driving risk
appetite backwards," said Hantec Markets analyst Richard Perry in a
note.
"Bond markets will now be eying the January 2014 high on the
10-year yield, which is a peak of 3.04%. The question is also
whether these market moves begin to show a decisive safe-haven bias
once more similar to the February fears," said Perry, noting those
moves were driven by a sharp increase in U.S. wage-growth data.
Share movers
Sky PLC shares (SKY.LN) jumped 3.6%, and rose as much as 7.2% to
$14.02, after Comcast Corp. (CMCSA) offered to buy the British
pay-TV operator
(http://www.marketwatch.com/story/comcast-outbids-21st-century-fox-in-pursuit-of-sky-2018-04-25).
The bid of GBP12.50 a share -- or GBP22 billion ($31 billion) -- is
a 16% premium to an offer from 21st Century Fox's Inc. (FOXA),
which already owns a 39% stake in Sky. Sky said it was withdrawing
previous pact agreeing to a takeover by Fox.
Antofagasta PLC (ANTO.LN) fell 2.6% after the miner said
first-quarter copper production
(http://www.marketwatch.com/story/antofagasta-copper-output-down-holds-to-guidance-2018-04-25)
fell 10.5% due to lower grades, but that guidance for the year is
unchanged
Lloyds Banking Group PLC shares (LLOY.LN) fell 1.6% even as the
lender posted a 23% rise in first-quarter pretax profit.
(http://www.marketwatch.com/story/lloyds-pretax-profit-up-23-as-ppi-provision-falls-2018-04-25)
Shire PLC shares (SHPG) (SHPG) fell 1.9%, but had traded higher
early Wednesday after the drug maker recommended shareholders
accept
(http://www.marketwatch.com/story/shire-seems-ready-to-accept-latest-takeda-offer-2018-04-24)
an improved takeover bid from Takeda Pharmaceutical Co.
(4502.TO).
Whitbread PLC shares (WTB.LN) turned lower, losing 0.2% after
the company said it will spin off Costa Coffee
(http://www.marketwatch.com/story/whitbread-to-spin-off-costa-coffee-business-2018-04-25-24854827)
into a separate business. Whitbread said it will remain the owner
and operator of its Premier Inn hotel business.
(END) Dow Jones Newswires
April 25, 2018 10:56 ET (14:56 GMT)
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