By Carla Mozee and Victor Reklaitis, MarketWatch
Bank shares shoved lower
U.K. stocks closed lower Wednesday, with the "Trump trade"
that's been driving a global stock rally seeming to fade as
investors turned more pessimistic about the chances of the new U.S.
president driving through planned reforms.
Traders were also continuing to reassess the outlook for U.K.
monetary policy, especially the path of interest rates, after a
faster-than-expected increase in British inflation. They didn't
show a big reaction to an attack on Thursday afternoon near the
U.K.'s Houses of Parliament in London that authorities were
treating as a terrorist incident.
The FTSE 100 slumped 0.7% to end at 7,324.72, finishing at its
lowest level since March 9, or nearly two weeks ago.
Some analysts said the downbeat mood in markets has been
triggered by doubts about the implementation of the Trump
administration's tax and reform policies in the U.S. Hopes for an
economic boost from the plans have been driving a rally in stocks
globally, known as the "Trump trade."
"Even the mistiest eyed optimist appears to be coming to the
realization that even on health care where there is some form of
consensus, that reforms are likely to take a lot longer than
realized and as such any other programs like tax and banking reform
and infrastructure spending are likely to get pushed further out
into the future," said Michael Hewson, chief market analyst at CMC
Markets UK, in a note.
Read:Here's the latest sign that the 'Trump trade' is losing
traction
(http://www.marketwatch.com/story/heres-the-latest-sign-that-the-trump-trade-is-losing-traction-2017-03-21)
And:Trump goes to bat for 'Trumpcare' ahead of vote
(http://www.marketwatch.com/story/trump-today-president-goes-to-bat-for-trumpcare-ahead-of-vote-2017-03-21)
Investors will be looking for more signs of whether the push for
reforms in the U.S. will be successful in Thursday's vote in the
U.S. House of Representatives on the Republican Party's health care
plan.
In the London attack, shots were fired, a police officer was
stabbed, and a car ran down people on Westminster Bridge, according
to media reports. Sky News reported two people were dead. The FTSE
100 largely maintained its losses as headlines about the violence
came out.
See:Pedestrians mown down by car, police officer stabbed in
apparent terror attack near U.K. parliament
(http://www.marketwatch.com/story/shots-fired-near-uk-parliament-police-treating-it-as-terrorist-incident-2017-03-22)
And:'Frightening' -- people at the scene react to violence
outside U.K. parliament
(http://www.marketwatch.com/story/frightening-people-at-the-scene-react-to-violence-outside-uk-parliament-2017-03-22)
Banks drop: Expectations that the Trump administration will
loosen U.S. regulations on banks and that the Fed will continue to
raise interest rates have helped drive gains for the bank sector
globally. On Wednesday in London, bank stocks gave up some of those
gains.
Barclays PLC (BCS) (BCS) shed 2.4%, HSBC Holdings PLC (HSBA.LN)
(HSBA.LN) (HSBA.LN) dropped 1.2%, and Lloyds Banking Group PLC
(LLOY.LN) (LLOY.LN) lost 1.6%.
Meanwhile, Royal Bank of Scotland PLC shares (RBS.LN) (RBS.LN)
fell 1.3%, and Standard Chartered PLC shares (STAN.LN) declined
0.9%.
Scotland and sterling: The pound recently changed hands at
$1.2480, close to its level late Tuesday of $1.2479.
The Scottish parliament's debate related to a new independence
referendum was suspended on Wednesday
(http://www.marketwatch.com/story/scottish-lawmakers-debate-on-independence-halted-after-london-attack-2017-03-22)
after the attack in London.
Most Holyrood lawmakers have been expected to support First
Minister Nicola Sturgeon's push
(http://www.marketwatch.com/story/pound-pushed-lower-as-scottish-referendum-worries-emerge-2017-02-27)
for a second referendum on whether Scotland should leave the U.K.
She has said she's concerned about Scotland's economic future when
it eventually leaves the European Union. U.K. Prime Minister
Theresa May doesn't support Sturgeon's stance.
In 2014, Scots by 55% to 45% voted to remain part of the U.K.
alongside England, Wales and Northern Ireland.
Sterling early Wednesday hit an intraday high of $1.2507, the
first time since Feb. 24 it traded above $1.25, according to
FactSet data. It jumped Tuesday after data showed British inflation
rose to 2.3%, overshooting the Bank of England's 2% target for the
first time since September 2013. That stoked speculation the
central bank may be compelled to raise interest rates sooner than
later.
See: U.K. rate hike in May?
(http://www.marketwatch.com/story/boe-rate-hike-in-may-pressure-mounts-after-uk-inflation-jumps-to-3-year-high-2017-03-21)
The pricier pound weighed on blue-chip stocks, as a weaker
sterling could help increase earnings and sales for multinational
companies listed in London.
Read:Opinion: Distracted by the Continent, May ignores trouble
brewing in Scotland
(http://www.marketwatch.com/story/distracted-by-the-continent-may-ignores-trouble-brewing-in-scotland-2017-03-21)
And:Bookies are more certain than ever that the U.K. headed for
a 'snap' election
(http://www.marketwatch.com/story/is-the-uk-headed-for-a-snap-election-this-year-bookies-are-more-certain-than-ever-2017-03-20)
Other stock movers: Kingfisher PLC (KGF.LN) finished down by
5.1% after the home-improvement retailer flagged concerns about the
uncertainty for the U.K. economy
(http://www.marketwatch.com/story/kingfisher-profit-rises-chairman-to-retire-2017-03-22)
in the wake of the Brexit vote. The company said it remains
cautious on its outlook for France ahead of the upcoming
presidential election.
See:How Brexit is hurting U.K.-focused stocks -- in one chart
(http://www.marketwatch.com/story/how-brexit-is-hurting-uk-focused-stocks-in-one-chart-2017-03-22)
(END) Dow Jones Newswires
March 22, 2017 13:25 ET (17:25 GMT)
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