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March 22, 2018, 1:12 p.m. EDT

FTSE 100 fall sharply, posts lowest close since December 2016

Bank of England holds key rate steady, but two policy makers sought a hike

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By Carla Mozee and Victor Reklaitis, MarketWatch


Reuters
Bank of England Gov. Mark Carney and his colleagues hold the key interest rate steady on Thursday.

London’s stock benchmark posted its lowest finish in more than a year Thursday, as blue-chips were clipped by renewed concerns about a potential global trade war.

The pound jumped as the Bank of England signaled it is preparing to raise interest rates, but the gain didn’t stick.

How markets are moving

The FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX -0.08% dropped 1.2% to end at 6,952.59, notching its weakest finish since December 2016. On Wednesday, the benchmark fell 0.3%.

The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.0685%  on Thursday hit an intraday high of $1.4217, but has since traded around $1.4104. That’s down from $1.4140 late Wednesday in New York. Also, sterling rose above €1.15 against the euro /zigman2/quotes/210561278/realtime/sampled GBPEUR +0.0168%  for the first time since June 2017, but was recently at €1.1459.

Sterling has risen about 1.1% against the greenback so far this week, and by roughly 1% against the euro /zigman2/quotes/210561278/realtime/sampled GBPEUR +0.0168% .

What’s driving markets

Stocks world-wide were whacked Thursday as the U.S. government planned to announce new trade restraints against China renewed fears about a potential trade war that could dent global economic growth. After the closing bell in London, President Donald Trump announced new tariffs against the world’s second-biggest economy.

Meanwhile, the pound got a lift after the Bank of England, led by Gov. Mark Carney, signaled that it’s looking at a potential interest-rate hike as U.K. wage growth improves. Investors had been pricing in a potential hike in May. The BOE for now held the key rate at 0.5%, but the vote was 7-2 as policy makers Ian McCafferty and Michael Saunders wanted a rate increase of 25 basis points.

A stronger pound can hurt stocks on the FTSE 100, as about 75% of revenue for its multinational components is generated overseas.

Ahead of the BOE statement, data showed U.K. retail sales grew by 0.8% on month in February, twice the pace seen in a Wall Street Journal survey of analysts.

The pound had been moving higher against the dollar /zigman2/quotes/210598269/delayed DXY -0.03%  since late Wednesday after the Fed signaled it’s still on track for three interest rate increases in 2018, disappointing investors hoping for four hikes after upbeat inflation and labor data. The U.S. central bank did raise its benchmark fed-funds rate as expected.

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.

What strategists are saying

“With traders fearful of levies sparking a trade war, they are exiting equities,” said David Madden, a CMC Markets UK analyst, in a note.

“It now looks increasingly likely we’ll see a rise to 0.75% at the [Bank of England’s] May meeting. Beyond that the outlook is less clear,” said Ben Brettell, senior economist at Hargreaves Lansdown, in a note.

Stock movers

Reckitt Benckiser Group PLC shares  rallied 4.8% after the consumer goods company said it’s ending talks about its potential purchase of Pfizer Inc.’s /zigman2/quotes/202877789/composite PFE +0.08% consumer health-care business. Reckitt Benckiser said it was looking to buy just part of the business, but that goal couldn’t be met.

The move is seen as leaving GlaxoSmithKline PLC /zigman2/quotes/209463850/composite GSK +0.26%  in prime position to buy the Pfizer assets. GSK shares were down 1.7%.

GKN PLC shares turned higher and were up 0.2%. The engineering company said it continues to view the £8.1 billion ($11.4 billion) hostile takeover offer from Melrose Industries PLC /zigman2/quotes/210306391/delayed UK:MRO -1.73%  as entirely opportunistic. Its statement came after Melrose announced it had come to an agreement with GKN’s pension-scheme trustees.

Shares of Halma PLC /zigman2/quotes/204238281/delayed UK:HLMA -0.24%  fell 2% after the safety, health and environmental tech company said foreign-exchange benefits have reversed and pretax profit for the full year will be in line with market forecasts.

Check out: Brexit hard-liners fling fish into Thames in bizarre protest

/zigman2/quotes/210598409/delayed
UK : FTSE UK
7,233.90
-5.76 -0.08%
Volume: 589,561
Dec. 9, 2019 4:59p
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/zigman2/quotes/210561263/realtime/sampled
US : Tullett Prebon
1.3152
+0.0009 +0.0685%
Volume: 0.0000
Dec. 10, 2019 12:18a
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/zigman2/quotes/210561278/realtime/sampled
US : Tullett Prebon
1.1881
+0.0002 +0.0168%
Volume: 0.0000
Dec. 10, 2019 12:18a
loading...
/zigman2/quotes/210561278/realtime/sampled
US : Tullett Prebon
1.1881
+0.0002 +0.0168%
Volume: 0.0000
Dec. 10, 2019 12:18a
loading...
/zigman2/quotes/210598269/delayed
US : U.S.: ICE Futures U.S.
97.62
-0.03 -0.03%
Volume: 0.00
Dec. 10, 2019 12:08a
loading...
/zigman2/quotes/202877789/composite
US : U.S.: NYSE
$ 38.32
+0.03 +0.08%
Volume: 14.97M
Dec. 9, 2019 6:30p
P/E Ratio
13.40
Dividend Yield
3.76%
Market Cap
$211.90 billion
Rev. per Employee
$580,595
loading...
/zigman2/quotes/209463850/composite
US : U.S.: NYSE
$ 45.63
+0.12 +0.26%
Volume: 3.62M
Dec. 9, 2019 6:30p
P/E Ratio
19.64
Dividend Yield
4.38%
Market Cap
$112.69 billion
Rev. per Employee
$430,379
loading...
/zigman2/quotes/210306391/delayed
UK : U.K.: London
227.80 p
-4.00 -1.73%
Volume: 10.43M
Dec. 9, 2019 4:35p
P/E Ratio
N/A
Dividend Yield
2.09%
Market Cap
£11.26 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/204238281/delayed
UK : U.K.: London
2,114.00 p
-5.00 -0.24%
Volume: 580,303
Dec. 9, 2019 4:35p
P/E Ratio
44.49
Dividend Yield
0.76%
Market Cap
£8.03 billion
Rev. per Employee
N/A
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Carla Mozée is a reporter for MarketWatch, based in London. Follow her on Twitter @MWMozee. Victor Reklaitis is a London-based markets writer for MarketWatch. Follow him on Twitter @VicRek.

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