By Carla Mozee, MarketWatch
U.K. stocks ended slightly lower Friday, but managed a solid weekly gain, as a record-setting trading week wraps ahead of speeches from Federal Reserve officials which could cement expectations for a hike of U.S. interest rates.
The FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +1.19% lost 0.1% to close at 7,374.26. The London index on Thursday edged down by less than 0.1%. For the week, the benchmark rose 1.8% to mark its best weekly gain since the week ended Dec. 9 when it posted a 3.3% weekly rise, according to FactSet data.
Equities on Friday found little relief from a drop in the pound, which fell after weaker-than-expected services-sector data pointed to the prospect of slowing British economic growth.
Concern about growth emanated from WPP PLC /zigman2/quotes/202300097/delayed UK:WPP +1.31% as the world’s largest advertising company said revenue growth stumbled in the second half of last year as clients in the U.K. and the U.S. spent less. Its shares were knocked down by 8%, trading at the bottom of the FTSE 100.
Stock rally: But U.K. blue chips were pushed to a record close of 7,382.90 this week. Equities worldwide rallied over the past five sessions as investors positioned for strengthening global growth, led by the U.S. The rally came as U.S. President Donald Trump reiterated his promise of more fiscal spending and tax cuts. Meanwhile, a number of Fed officials signaled that the world’s largest economy appears ready for another interest rate hike—it would mark three interest rate hikes in the past two years.
The probability of a rate rise in March has now reached 77.5%, up from around 30% late last week, according to CME Group data.
Investors on Friday will watch for Fed Chairwoman Janet Yellen’s comments on the economy and interest rates when she speaks at 5 p.m. London time, or 1 p.m. Eastern Time. Other Fed officials will make comments throughout the day.
“It will be interesting to see if [Yellen] is more reserved than many of her FOMC colleagues, who have been steadily preparing the market at least for the potential of a March hike,” said Richard Perry, market analyst at Hantec Markets, in a note. “If Yellen subtly backs away from the hawkish comments of other Fed members, there could be some key moves on the dollar.”
The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.0240% was buying $1.2223, down from $1.2268, in what’s set to be a losing weak for sterling against the greenback.
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Economic data: The pound dropped Friday after a reading on U.K. services activity in February fell to a 5-month low. IHS Markit/CIPS said their services PMI came in at 53.3 as respondents pointed to more cautious spending among consumers. The reading was below the FactSet estimate of 54.5.
“Today’s figure, along with the equivalent readings for the manufacturing and construction sectors, point to 0.4% GDP growth in the first quarter,” wrote Ben Brettell, senior economist at Hargreaves Lansdown.
The government’s growth estimate for the quarter currently stands at 0.7%.
The PMI “survey showed that business confidence remained strong,” said Brettell. “Nevertheless, with uncertainty still rife over how and when the UK will actually leave the EU, and survey data pointing to a modest slowing of activity, the Bank of England looks most unlikely to consider raising interest rates in the near to medium term.”
Stock movers: London Stock Exchange Group PLC shares dropped 0.9% as the stock-exchange operator said full-year net profit fell. Investors have increasingly started to question whether the company’s planned merger with Deutsche Boerse AG /zigman2/quotes/205502669/delayed DE:DB1 +1.19% will be completed.
Advancers Friday included Merlin Entertainments PLC , with shares up 1.3%.