U.K. stocks closed higher Tuesday, as commodity shares worked on recovering ground lost in the prior session and a softer pound provided a boost.
The pound lost ground as traders assessed ongoing political turmoil and U.K. jobs data that arrived before the Bank of England decides what’s next for monetary policy.
How markets are moving
The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.1809% fell to $1.3162 from $1.3236 late Monday in New York. A weaker pound can boost the FTSE 100, as the index’s multinational companies generate most of their sales in other currencies.
What’s driving the market
Commodity-related stocks advanced following a rough session for the sector on Monday that contributed to the FTSE 100 closing lower for the first time in three sessions.
Mining shares on Tuesday advanced after struggling Monday on concerns that slowing economic growth in China could hurt demand for industrial and precious metals, particularly as the U.S. engages in a trade fight with the world’s second-largest economy.
Shares of oil producers were higher Tuesday, but then turned mixed, as September Brent crude was up slightly after a nearly 5% beating in the prior session.West Texas Intermediate crude prices couldn’t hold on to an early gain. Oil futures on Monday tumbled, hit by talk about a possible release of oil by the U.S. from global crude reserves and the potential for U.S. waivers on Iran oil sanctions.
The FTSE 100 briefly slipped into the red in midmorning action as the pound rose against the U.S. dollar in the wake of the U.K. jobs data, which largely met expectations as the unemployment rate stood at 4.2% and basic wages rose 2.7% between March and May. But then political worries weighed on the currency.
The labor report will be under consideration by the Bank of England, which investors are watching for the possibility of an interest-rate rise by policy makers from 0.5%. Their decision is due to be released Aug. 2. BOE Gov. Mark Carney on Tuesday during Treasury testimony from the Farnborough Airshow reportedly said the U.K. leaving the European Union without a Brexit deal would be a “material event” for the outlook on interest rates, and a no-deal outcome would have “big economic consequences” for Britain.
U.K. Prime Minister Theresa May late Monday narrowly won support in the House of Commons for changes related to trade in the bill that will take the U.K. out of the EU. May accepted amendments sought by anti-EU members of her Conservative Party, including one that would keep the U.K. from collecting tariffs for the EU, and May’s move raised the ire of pro-EU members of her party.
What strategists are saying
The pound “is dipping on the back of fears that Theresa May’s government could face defeat in the Commons,” said Kathleen Brooks, research director at Capital Index, in a note. Referring to the opposition Labour Party, Brooks said the defeat could come “if Labour sides with pro-European MPs and calls for the U.K. to remain in the Customs Union, if there is no trade deal with the EU by March next year.”
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Among miners, Antofagasta PLC /zigman2/quotes/200173667/delayed UK:ANTO +0.49% rose 2.2%, Glencore PLC /zigman2/quotes/201400686/delayed UK:GLEN -0.42% /zigman2/quotes/209462106/delayed GLCNF +0.49% picked up 1.3% and Rio Tinto PLC /zigman2/quotes/208934945/delayed UK:RIO +0.51% gained 1.7%.
In the oil sector, shares of Royal Dutch Shell PLC /zigman2/quotes/204253697/delayed UK:RDSB -0.27% /zigman2/quotes/207682964/composite RDS.B -0.51% rose 0.4%, and BP PLC /zigman2/quotes/207305210/composite BP +0.24% was up 0.5%.
Royal Mail PLC shares /zigman2/quotes/204213037/delayed UK:RMG +1.25% advanced 1.8% after the postal-services provider backed its 2019 financial expectations after a 2% rise in underlying revenue in the first quarter.
British Land Co. PLC shares /zigman2/quotes/210491538/delayed UK:BLND +0.31% fell 0.9% as the property developer warned that the retail market remains challenging. The company did say it plans to pay an interim dividend of 7.75 pence per share, up 3% from the first-quarter dividend a year ago.