Investor Alert

London Markets

May 14, 2018, 12:07 p.m. EDT

U.K. stocks pull back after longest weekly win streak in 12 years

IWG soars 23% on takeover talks

By Sara Sjolin, MarketWatch

A Union flag flutters near the Houses of Parliament in London

U.K. stocks moved slightly lower on Monday, falling from a 3½-month high as investors absorbed the latest developments in the U.S.-China trade talks and a rebound in the pound.

Shares of IWG PLC soared after the flexible-workplace company said it’s in talks with three rival private-equity firms about a potential take over.

What are markets doing?

The FTSE 100 index (FTSE:UK:UKX)  slipped 0.2% to close at 7,710.98, pulling back from its highest close sine Jan. 23 scored on Friday. Last week, the London benchmark also logged its longest weekly winning run since July 2005, having advanced for seven straight weeks in a row.

The pound (XTUP:GBPUSD)  rose to $1.3598, compared with $1.3542 late Friday in New York.

What is driving the market?

Investors in London took a breather on Monday after the recent winning run that was boosted by a rally in oil companies and a drop in the pound.

On Monday, sterling rebounded and in turn added pressure on the FTSE’s many multinational companies. About 75% of revenue for the index is generated overseas so a stronger currency means actual revenue shrinks when converted back into sterling.

Oil prices were lower earlier in the day but swung higher and lifted U.K. energy firms into the close. Both West Texas Intermediate crude  and Brent  jumped to their highest levels since November 2014 last week after President Donald Trump said he’d pull the U.S. out of the Iran nuclear deal and reintroduce sanctions that could include the country’s oil exports.

Traders were Monday also watching the latest developments in trade talks between the U.S. and China. Trump was seen as paving the way for constructive discussions with Beijing this week after he over the weekend threw a lifeline to struggling Chinese telecom giant ZTE.  

There were no major economic data on tap in the U.K. on Monday, but unemployment data are due on Tuesday.

What are strategists saying?

“It’s looking like one of those meaningless Mondays—well, in Europe at least—with an empty economic calendar and the barest pretence of movement from the markets,” said Connor Campbell, financial analyst at Spreadex, in a note.

“Granted, holding at a near 16-week, 7,720-crossing peak, the FTSE can feel pretty pleased with itself, despite not actually budging after the bell. If its recovery keeps going—something that might be dependent on how sterling reacts to Tuesday’s U.K. jobs report—then a new all-time high might be on the cards, with the index one final sprint away from the 7,800-teasing record set back in the middle of January,” he added.

Stock movers

Among oil companies, shares of Royal Dutch Shell PLC   and BP PLC   (NYS:BP) both climbed 1.1%.

Centrica PLC (LON:UK:CNA)  climbed 1.4% after the utility company said it is on track to hit its targets for 2018.

Shares in betting companies rallied following news of a U.S. Supreme Court ruling in favor of the state of New Jersey in a case that could open sports betting around the nation. William Hill PLC  jumped 11%, while Paddy Power Betfair PLC’s stock  added 12%

Outside the FTSE 100, IWG PLC (LON:UK:IWG)  surged 23% after the company late Friday said it has received an approach from Lone Star and two separate indicative proposals from Starwood Capital and TDR Capital about a potential takeover.

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