FTSE 100 pulls back as investors brace for possible U.K. rate hike

  • Written by MarketWatch
  • Published in Economics

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 moving

The FTSE 100 UKX, -0.36%[1] 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[2] and ended with a third consecutive weekly advance.

The pound GBPUSD, +0.1526%[3]  rose to $1.3133 from $1.3104 late Friday in New York.

What’s driving markets

U.K. and European equities SXXP, -0.32%[4]  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%[5]  sank 1.5% after disappointing results and a downbeat outlook from Twitter Inc.[6] TWTR, -20.54%[7]  .

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[8], while there’s speculation the BOJ may tweak its trademark yield-curve control policy[9] 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...

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