U.K. stocks fell Monday, as a strong pound weighed on London-listed multinationals and as traders prepared for a week of central bank policy meetings, with many expecting an interest-rate increase by the Bank of England.
How markets are movingThe FTSE 100 UKX, -0.37% lost 0.3% to reach 7,678.26. All sectors were in the red, led by the tech and utility groups. On Friday, the London benchmark closed 0.5% higher and ended with a third consecutive weekly advance.
The pound GBPUSD, +0.1374% rose to $1.3133 from $1.3104 late Friday in New York.
What’s driving marketsU.K. and European equities SXXP, -0.32% struggled in the penultimate trading day of July following Friday’s selloff in U.S. internet-related stocks. The Nasdaq Composite Index COMP, -1.46% sank 1.5% after disappointing results and a downbeat outlook from Twitter Inc. TWTR, -20.54% .
The pound’s advance against the U.S. dollar was also putting the FTSE 100 under pressure. Sterling strength can weigh on U.K.-listed multinational companies as they make the most of their revenue overseas.
For the week, the Bank of England meeting on Thursday is in focus. Investors have widely priced in the prospect that policy makers, led by Bank of England Gov. Mark Carney, will lift the U.K.’s key rate to 0.75% from 0.5%.
The BOE’s counterparts the U.S. Federal Reserve and the Bank of Japan will release policy statements on Wednesday and Friday, respectively. While neither is expected to move on interest rates, the Fed is expected to signal again that more hikes are in the pipeline, while there’s speculation the BOJ may tweak its trademark yield-curve control policy that aims to keep the 10-year Japanese government bond yield at nearly 0%.
Global trade tensions will remain in focus this week, with officials from the European Union, Japan, South Korea, Canada, Mexico set to meet in Geneva on Tuesday to discuss uniting against the U.S. Trump administration’s threat to slap tariffs on automobiles imports.
Meanwhile, China is ready to open talks with the U.K. about a free trade deal once Britain’s has exited from the European Union in March, U.K. Foreign Secretary Jeremy Hunt said Monday, according to media reports.
With the last day of trading for July coming on Tuesday, the FTSE 100 was on course for a 0.6% monthly rise. That would follow June’s loss of 0.5%.
What strategists are saying• “This week the market will hear from BOJ, the Fed and the BOE, with BOE likely creating the most volatility as traders will see how the U.K. central bank will try to balance its desire to return to normalization with the looming prospect of no-deal Brexit that could wreak economic havoc across multiple industries,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management.
“There is a small possibility that the BOE could decide to hold off given the uncertainty ahead, but having essentially guided the market to rate hike, policy makers may choose to hold a stiff upper lip and tighten policy as promised, though forward guidance is very much likely to indicate that any further rate hikes will be contingent on progress in Brexit talks,” Schlossberg said in a note.
• “With Netflix, Facebook and now Twitter disappointing with results, investors are seriously questioning these advertising revenues based or subscription-based models,” said Jasper Lawler, head of research at London Capital Group, in a note.
“This original FAANG trade, which pretty much guaranteed impressive returns across previous years, suddenly looks a lot more complicated,” said Lawler.
Stocks in focusGVC Holdings PLC shares GVC, +4.84% jumped 5.2%, topping the FTSE 100, after the company said it’s creating a sports betting and online gaming joint venture in the U.S. with MGM Resorts International MGM, -1.60% . The move came after the U.S. Supreme Court in May cleared the way for states to allowing gambling on sporting events.
Wm Morrison Supermarkets PLC MRW, +2.03% rose 2.1% following a ratings upgrade to buy from neutral at UBS.
Economic newsBritish consumer borrowing remained broadly stable in June, according to figures released Monday by the Bank of England. Banks lent £5.4 billion ($7.08 billion) to consumers last month, net of repayments, compared with £5.3 billion in May.
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