By Carla Mozee, MarketWatch
Utility stocks fall on price-cut concerns
LONDON (MarketWatch)--U.K. stocks fell Friday, as energy shares
slid alongside oil prices, while the pound tumbled to a nearly
five-year low against the dollar on interest-rate concerns.
Pound: The pound was "in free fall" against the greenback, said
Angus Campbell, senior analyst at FxPro. Sterling (GBPUSD) was
trading at $1.4745 at the time of the European close, the first
time it's traded below $1.48 since June 2010. Late Thursday, it
bought $1.4884.
Bank of England Governor Mark Carney
(http://www.wsj.com/articles/subdued-inflation-will-delay-rate-rises-says-mark-carney-1426172242?KEYWORDS=mark+carney)
"was pretty dovish on the outlook" for monetary policy when he
spoke Thursday, said Campbell.
"The outlook from a global perspective, not just the U.K., is
looking particularly sketchy," said Campbell. "The inflation
outlook is low and poor, the growth outlook isn't all that much
better," and with the Federal Reserve set to raise interest rates
and a general election set for May in the U.K., "sterling will
struggle against the dollar".
Carney said it may take longer than expected for U.K. inflation
to rise back to the bank's 2% target, which could contribute to a
delay in raising rates. The key rate has been at a record low of
0.5% for six years.
While the pound is being hammered against the dollar, sterling
"has appreciated quite significantly against the euro...that's
going to cause further deflationary pressure," said Campbell. The
eurozone is the U.K.'s largest trading partner. The euro has
dropped nearly 8% against the pound this year. The euro (EURGBP) on
Friday was buying 71.37 pence compared with around 70.62 pence
Thursday.
Stocks: The FTSE 100 logged a 2.5% weekly loss, its biggest
since December.
On Friday, the FTSE 100 fell 0.3% to 6,740.58, led by losses in
the oil and gas group as crude-oil prices (CLJ5) dropped almost 4%
(http://www.marketwatch.com/storyno-meta-for-guid), hit after the
International Energy Agency said oil prices remain fragile
(http://www.marketwatch.com/story/oil-sinks-after-iea-refers-to-price-stability-as-a-facade-2015-03-13).
"Behind the facade of stability, the rebalancing triggered by
the price collapse has yet to run its course, and it might be
overly optimistic to expect it to proceed smoothly," the IEA said
in its monthly report.
Shares of oil producer BG Group PLC fell 3.1%, Tullow Oil PLC
dropped 3.2% and oil major BP PLC (BP) gave up 1.8%.
Meanwhile, some "mining stocks have been marked down, which, as
much as anything else, is reflective of the fact that [the market]
is a bit more risk-off today," said Richard Hunter, head of U.K.
equities at Hargreaves Lansdown.
Shares of iron-ore producer Anglo American PLC fell 2.2%,
Glencore PLC lost 2.9% and Rio Tinto PLC gave up 1.7%.
The combination of energy, mining and banking stocks makes up
about 40% of the FTSE 100 by value "so inevitably, any weakness in
commodity prices, including oil, is a drag on the index," said
Hunter. The FTSE 100 recently hit its best closing on record, but
has since been largely lackluster as commodity stocks have
struggled. The benchmark "last year finished down nearly 3% for
similar reasons," he said.
Also Friday, shares of energy provider SSE PLC fell 2%, and
British Gas' parent company Centrica PLC lost 1.5%. The losses came
as Labour Party leader Ed Miliband is expected to say that if his
party wins the May 7 election, he'll push for legislation allowing
the energy regulator to force companies to cut prices by up to 10%
if it's determined they are too high.
Miliband is slated to outline the plan at a Labour Party event
on Saturday in Birmingham, according to reports.
But advancers included Whitbread PLC , with shares up 1.4% after
a ratings upgrade at Deutsche Bank to buy from hold for the company
behind Costa Coffee and the Premier Inn hotel chain.
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