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Sept. 21, 2017, 12:14 p.m. EDT

Banks rise, but FTSE 100 fails to find a footing

Miners pull back as rising dollar hits commodity prices

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By Carla Mozee, MarketWatch


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Shares of Anglo American, whose operations include diamond mining, rose Thursday.

U.K. stocks struggled to find momentum Thursday, even as bank shares rose after the U.S. Federal Reserve hinted at an interest-rate rise and announced it would begin paring the size of its balance sheet next month.

After swinging between gains and losses throughout the day, the FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +0.09% ended 0.1% lower at 7,263.90.

After trading in London closed Wednesday, the Fed said it would begin to shrink its huge $4.5 trillion balance sheet in October. The U.S. central bank also signaled plans for one more increase in interest rates before the end of 2017, which should lift borrowing costs for auto loans, mortgages and business loans. Fed policy makers also hinted at another three rate increases in 2018.

“This may have surprised investors looking for a downward revision in the rate path due to the recent soft patch in inflation. As a result, the probability for another rate hike by December jumped to 70%, and the market bought dollars aggressively,” said Charalambos Pissouros, senior analyst at IronFX, in an note.

Bank boost: The prospect of higher interest rates boosted bank stocks on Wall Street, and similar shares in U.K. and Europe /zigman2/quotes/210599339/delayed XX:SX7P -0.49% followed suit. In London, Barclays PLC /zigman2/quotes/208409333/delayed UK:BARC -1.17%   /zigman2/quotes/206581728/composite BCS 0.00%  gained 2.4% Royal Bank of Scotland Group   rose by 1.6%.

Lloyds Banking Group /zigman2/quotes/202285510/delayed UK:LLOY -1.33%   /zigman2/quotes/200709414/composite LYG 0.00% picked up 2.7%, while Standard Chartered /zigman2/quotes/200125072/delayed UK:STAN +1.29%  ended 0.5% higher.

Mining down: Meanwhile, shares of miners fell, as commodity prices came under pressure from a rise in the U.S. dollar /zigman2/quotes/210598269/delayed DXY +0.65% after the Fed’s announcement. Gold , which like other metals is priced in dollars, slumped more than 1%.

Shares of gold producers Fresnillo PLC /zigman2/quotes/201300065/delayed UK:FRES -2.74%  and Randgold Resources PLC   /zigman2/quotes/201432642/composite GOLD -2.14%  lost 2.2% and 2.3%, respectively. Antofagasta PLC  /zigman2/quotes/200173667/delayed UK:ANTO -1.24% dropped 2.3% and Rio Tinto PLC /zigman2/quotes/208934945/delayed UK:RIO -1.07%   /zigman2/quotes/202627887/composite RIO -2.42%   /zigman2/quotes/200083756/delayed AU:RIO -2.89%  declined 1.2%.

But Anglo American PLC /zigman2/quotes/201381512/delayed UK:AAL -2.17%  rose 2.9%, after the family trust of Anil Agarwal, the founder of India’s largest mining company Vedanta Resources PLC, revealed plans to ramp up its investment in the mining heavyweight by as much as $2 billion. That would make Volcan Investments Ltd., the largest stakeholder in Anglo American.

Stock movers: Capita PLC shares /zigman2/quotes/204738740/delayed UK:CPI +1.31% tumbled 12% after the outsourcing and professional services company posted a 26% fall in pretax profit for the first half of the year. It did say that trading was broadly in line with expectations.

CRH PLC /zigman2/quotes/201759252/delayed UK:CRH +1.30%   /zigman2/quotes/202550827/composite CRH +0.88% gained 2.4%. The Irish building materials supplier said it has agreed to buy Ash Grove Cement Co. in a deal valuing the U.S. cement provider at $3.5 billion, the companies said.

Johnson Matthey PLC /zigman2/quotes/207054035/delayed UK:JMAT -0.51%  soared 15% after the catalyst maker revealed plans to tap into the electric car battery market and backed its guidance for fiscal 2018.

Pound holds: Sterling /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.0077%  managed to hold to slightly higher ground Thursday. The pound was buying $1.3572, compared with $1.3494 late Wednesday in New York.

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Carla Mozée is a reporter for MarketWatch, based in London. Follow her on Twitter @MWMozee.

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