LONDON MARKETS : FTSE 100 Rises Off 15-month Low Ahead Of Inflation Data
By Carla Mozee, MarketWatch
Fenner jumps on Michelin buyout; home builders gain ground after Bellway's update
U.K. blue-chip stocks rose Tuesday, slightly recovering from lows not seen in more than a year, as traders stepped back into the market.
The next driver for stocks in London may come from British inflation figures due later Tuesday, before the Bank of England makes its next monetary policy decision on Thursday. Focus is also on the U.S. Federal Reserve, whose policy makers begin a meeting today.
How markets are moving
The FTSE 100 index picked up 0.4% to 7,068.13. Tech and financial shares were among the sectors moving higher, but the utilities group is losing the most. On Monday, the index slid 1.7% and marked its lowest close since Dec. 21, 2016, according to FactSet data.
The pound traded at $1.4050, up from $1.4025 late Monday in New York.
What's driving markets
The FTSE 100 had popped up by as much as 0.4%, with investors snapping up shares after the market suffered its sharpest loss since early February. Stocks were rattled after the pound rallied on news the EU and U.K. have agreed on the broad terms of a Brexit transition deal.
A stronger pound can weigh on the FTSE 100, as about 75% of the benchmark's revenue is made overseas, and that revenue therefore shrinks when translated back into sterling.
In addition, global stock markets on Monday suffered as U.S. equities slid, dragged down by tech-sector losses led by Facebook Inc. , which is coming under official scrutiny over its use of member data.
Stocks and sterling may be on the move after the Office for National Statistics releases consumer price inflation data for February. Analysts polled by FactSet are looking for a month-over-month rise of 0.5% and the inflation rate to come in at 2.8%. That would be a decrease from the current rate of 3%, which is well above the Bank of England's target of 2%.
Analysts say the BOE could hint at an interest rate rise in May when policy makers release their statement on Thursday.
Later Tuesday, the U.S. Federal Reserve will begin its two-day meeting, and the Fed is expected to raise its benchmark interest rates when its policy decision is released Wednesday.
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What strategists are saying
"After yesterday's rate hike-fearing, tech stock-bleeding market-wide declines, the European indices woke up in rebound mode this Tuesday. The FTSE quickly rose ... a move that lifted the index back towards 7,070," said Connor Campbell, financial analyst at Spreadex, in a note.
"As for the pound, the currency continued to ride the swell of positive sentiment that arose following yesterday's Brexit transition deal announcement," he said.
"All this, however, may be temporary. That's because the U.K. still has February's inflation reading to process," he added. "And while 2.8% is undoubtedly still high, the big question is over how much hawkish clout such a figure would have, especially with a Bank of England meeting on Thursday."
Micro Focus shares (>> company sheet) rose 5.5%, topping the FTSE 100. Shares on Monday plunged 46% for the software maker said CEO Chris Hsu has resigned and warned that revenue for fiscal 2018 will fall more than previously anticipated.
Home builders were higher after Bellway PLC said it's on track to deliver record sales for the full year and that pretax profit rose 17% for the first half of fiscal 2018. Bellway PLC rose 2.8% on the mid-cap FTSE 250 index
Off the FTSE 100, Fenner PLC surged 25% as the polymer-based products manufacturer reached a deal, announced late Monday, to be purchased by Compagnie Generale des Etablissements Michelin in a deal valuing Fenner at GBP1.2 billion pounds ($1.67 billion) .