U.K. stocks dropped Thursday, with broad-based losses appearing after Federal Reserve meeting minutes suggested policy makers will raise U.S. borrowing rates at a faster-than-expected pace.
The losses came ahead of a second reading on U.K. gross domestic product for the fourth quarter. Among the market’s few advancers was banking heavyweight Barclays PLC after the release of its financial results.
How markets are moving
The FTSE 100 index UKX, -0.87% fell 1.2% to 7,196.67, with just roughly 10 of its components advancing. The consumer goods and tech sectors were down the most. On Thursday, the benchmark rose 0.5%.
The pound GBPUSD, -0.2515% bought $1.3893, down from $1.3919 late Wednesday in New York.
The yield on the 10-year gilt TMBMKGB-10Y, +0.35% rose 1 basis point to 1.56%, according to Tradeweb. Yields rise when prices fall.
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What’s driving markets
Investors yanked down U.K. and European equities SXXP, -0.65% in the wake of a selloff on Wall Street and as U.S. stock futures ESH8, +0.06% YMH8, -0.15% slumped early Thursday.
U.S. stocks DJIA, -0.67% SPX, -0.55% retreated from a rally Wednesday after minutes of the Fed’s January meeting showed officials altered their message to point to “further gradual increases,” underscoring their desire to resume rates increases in 2018 as officials foresee the economy getting stronger than it was at the end of 2017. The S&P 500 SPX, -0.55% closed Wednesday lower by 0.6%, giving up an intraday gain of 1.2%.
The prospect of more rate hikes in the pipeline sent bond yields rising, as prices fall, and the U.S. dollar DXY, -0.09% higher. That move pressured prices of dollar-denominated commodities such as copper HGK8, -0.96% , gold GCJ8, -0.47% and oil CLJ8, -0.65% and in turn shares of metals and oil producers. Shares of oil giant Royal Dutch Shell PLC RDSB, -0.70% fell 0.8%.
Economic data
The second reading of U.K. GDP growth is widely expected to remain at 1.5% for the last three months of 2017. The Office for National Statistics is slated to release the report at 9:30 a.m. London time, or 4:30 a.m. Eastern Time.
What strategists are saying
“That stock markets remain in a volatile state is perfectly illustrated by the latest session on Wall Street. Just as it seemed traders had acclimatized to inflation, rising interest rates and higher bond yields, the fears that caused this month’s crash were reignited by minutes from the Federal Reserve’s last meeting,” said Lee Wild, Interactive Investors’s head of equity strategy, in a note.
“We’ve known for some time that U.S. policy makers might squeeze in extra rate hikes in 2018, so it’s possible this new sell-off is just a knee-jerk reaction to the minutes. However, the Fed must prevent [U.S. President Donald] Trump’s pro-business reforms overheating the U.S. economy, and there’s risk here that central bankers mismanage the rate-hike cycle,” said Wild.
Stock movers
Barclays shares BARC, +4.85% surged 5.7% after the bank said it would more than double its dividend next year even as the bank swung to a full-year loss of £1.9 billion ($2.64 billion).
Anglo American PLC shares AAL, -2.43% dropped 3.3% after the miner posted 2017 net profit of $3.17 billion, missing the $3.25 billion consensus estimate from FactSet.
British American Tobacco PLC BATS, -4.40% fell 4.5%. The producer of brands including Lucky Strike and Dunhill cigarettes said that pretax profit increased more than fourfold in 2017 but noted that total group cigarette and tobacco-heated products on an organic basis fell 2.6%. The company said figure was better than an estimated industry declined by around 3.5%.