By Carla Mozee and Mark DeCambre, MarketWatch
Retail sales surge in May; Rolls-Royce to cut thousands of
jobs
U.K. stocks on Thursday finished at the highest level in about
four weeks as the pound weakened following the European Central
Bank's decision to begin gradually closing the chapter on its
crisis-era monetary policy.
Upbeat domestic retail sales figures offset worries about
slowing economic growth in China, which had hobbled shares of
mining companies in early trade.
How markets are performing
The FTSE 100 index reversed opening losses to finish up 0.8% to
7,765.79, helping the U.K. benchmark end a two-day skid and
reaching its highest level since May 23, according to WSJ Market
Data Group. On Wednesday, the blue-chip benchmark shed less than 1
point
(http://www.marketwatch.com/story/ftse-100-moves-lower-as-oil-shares-fall-fed-steps-into-the-spotlight-2018-06-13).
The pound bought $1.3302, trading about 0.5% lower compared
against the buck and giving up gains sparked by the
better-than-expected retail data. Against the euro , sterling
fetched EUR1.1429, up from EUR1.1346 in the prior session.
What's driving markets
The European Central Bank said it would phase out some of its
easy-money policies, a day after the U.S. Federal Reserve raised
its benchmark interest rate and signaled a total of four rate
increases in 2018
(http://www.marketwatch.com/story/fed-hikes-interest-rates-now-sees-4-moves-this-year-2018-06-13).
ECB President Mario Draghi said the central bank would taper its
monthly bond purchases beginning in October, aiming to bring the
controversial program to a halt by the end of 2018, with an eye
toward raising rates in the summer of 2019.
Draghi's decision was widely expected but knocked down the pound
and euro, perhaps due to the central bank boss's emphasis of a
gradual process to unwinding quantitative-easing programs that have
been in place for years.
On Wednesday, the Fed lifted its benchmark federal-funds rate by
a quarter-percentage point--to a range of 1.75% to 2%.
And see:The ECB, not the Fed, is the match that will spark bond
market volatility: analyst
(http://www.marketwatch.com/story/the-ecb-not-the-fed-is-the-match-that-will-spark-bond-market-volatility-analyst-2018-06-13)
Investors will look ahead to a meeting of Bank of England policy
makers on June 21.
What strategists are saying
"Perhaps the bigger surprise (for financial markets at least)
was that the ECB is clearly in no hurry to raise interest rates.
The Bank's earlier line that rates were expected 'to remain at
their present levels for an extended period' was replaced with a
pledge to keep them unchanged," wrote Jennifer McKeown, chief
European economist at Capital Economics in a Thursday research
note.
Stock movers
Mining stocks had been knocked by concerns about the economic
health of China, the world's largest buyer of copper and a major
purchaser of other metals, but ended mixed.
Business activity in China slowed in May, and readings on
industrial output, retail sales and fixed-asset investment from the
National Bureau of Statistics fell short of expectations
(http://www.marketwatch.com/story/business-activity-slows-in-china-in-may-2018-06-14).
Investors also took notice of a decision by the People's Bank of
China to stand pat on interest rates
(http://www.marketwatch.com/story/boc-stands-pat-on-rates-fails-to-follow-fed-as-usual-2018-06-14),
breaking a pattern of raising rates in the footsteps of the U.S.
central bank.
Shares of copper producer Antofagasta PLC (ANTO.LN) lost 1.5%,
Glencore PLC (GLEN.LN) cut its drop to end up 0.1%, as did shares
of Anglo American PLC (AAL.LN), which rose 0.8%.
Unilever PLC (ULVR.LN) fell 2.8%, paring a steeper drop of about
4%. The consumer-goods maker's CFO, Graeme Pitkethly, warned sales
growth in the first half of 2018 will be below the full-year target
of 3% to 5%
(http://www.marketwatch.com/story/unilever-extremely-unlikely-to-be-in-ftse-cfo-2018-06-14),
but maintained sales guidance for the year. Pitkethly also said it
is "extremely unlikely" Unilever will maintain a primary listing in
London after its move to consolidate in Rotterdam.
Aveva Group PLC (AVV.LN) surged 12% on the FTSE 250 midcap index
. The industrial-software company said it was maintaining its
dividend even as fiscal 2018 pro forma pretax profit fell 34%
(http://www.marketwatch.com/story/aveva-2018-profit-falls-34-on-reverse-takeover-2018-06-14),
stemming in part from reverse acquisition by France's Schneider
Electric SE (SU.FR)
Rolls-Royce Holdings PLC shares (RR.LN) surged by 6.5% after the
British aircraft-engine maker said it would cut 4,600 jobs
(http://www.marketwatch.com/story/rolls-royce-to-cut-4600-jobs-in-restructuring-2018-06-14),
in its latest round of job reductions.
Economic data updates
Retail sales in the U.K. in May exceeded forecasts, as a stretch
of good weather and Royal Wedding celebrations spurred spending in
food and household goods stores, the Office for National Statistics
said. Sales were up 1.3% on the month, compared with the 0.5%
estimated. They were up 3.9% year-over-year, compared with the 2.4%
expected in a FactSet consensus estimate.
"Today's strong retail sales print offsets multiple downside
surprises this week--in manufacturing, trade, construction, pay and
RPI inflation--and is supportive of our call for a second-quarter
rebound in growth to 0.4%, and an August hike," said Jacob Nell,
chief U.K. economist at Morgan Stanley, in a note. "Still this
week's mixed data points to continued uncertainty over the rebound,
implying a cautious 'wait-and-see' tone at next week's Monetary
Policy Committee meeting."
(END) Dow Jones Newswires
June 14, 2018 14:15 ET (18:15 GMT)
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