London Markets: FTSE 100 Steady, But Pound Pain Persists

U.K. stocks held to thin gains Monday, feeling the weight of persistent strength in the pound against the U.S. dollar, but the London benchmark was aided by gains for energy companies and Barclays PLC.

Meanwhile, shares of bookmakers were slammed lower on fears that a possible regulatory move by the British government will cut into their revenue.

How markets are moving: The FTSE 100 index UKX, +0.05%  was up less than 0.1% at 7,731.14, but the index had been down as much 0.3% as trading got underway.

Health care, utility, oil and gas and telecom stocks rose, but decliners were led by the consumer services, tech and industrial groups. On Friday, the benchmark increased by 0.4%, the first win in five sessions. But it fell 0.6% last week, the first weekly loss in seven.

The pound GBPUSD, +0.3609%  traded at $1.3901, up from $1.3853 on Friday in New York.

Read: Why one contrarian investor says the British pound could rally to $1.40 in 2018

What’s driving markets: The pound was back in focus, pushing back toward $1.39 against the greenback. Sterling rose roughly 1% last week, logging a fifth consecutive weekly rise.

The negative start to trading came “as the U.S. government shutdown moves into a third day, with lawmakers failing to reach an accord over the weekend amid a contentious immigration debate. Subsequent sterling strength is hindering the U.K.’s blue chip index, holding back its army of foreign-exposed constituents,” said Accendo Markets analysts Mike van Dulken and Henry Croft in a note.

A stronger pound can reduce profit made overseas by multinational companies when it’s converted back into sterling. Among such international companies, drug maker GlaxoSmithKline PLC GSK, -0.04%   lost 0.3%, Ashtead Group PLC AHT, +0.05%  , which rents heavy equipment, fell 0.5%, and Smirnoff vodka and Johnnie Walker whisky Diageo PLC DGE, -0.44%  shed 0.2%.

Lawmakers in the Republican-led Senate are expected to hold a procedural vote Monday at 7 p.m. London time, or 12 p.m. Eastern Time, to keep the government funded through Feb. 8. The government shut down after lawmakers couldn’t reach an agreement over immigration issues.

This week, markets will the U.K. jobs report and the first look at British gross domestic product in the fourth quarter.

Read: What happens with stocks when the government shuts down

Stock movers: Paddy Power Betfair PLC PPB, -0.89%  fell 1.2%, falling alongside other bookmakers, after a Sunday Times report that the U.K. government will set a limit the stake on betting shop terminals to £2, down from £100, in an effort to curb gambling problems.

Hit hard on the mid-cap FTSE 250 index MCX, -0.13%  , shares of William Hill PLC WMH, -12.43%  tumbled 13%, Ladbrokes Coral Group PLC LCL, -10.47%  sank 10% and GVC Holdings PLC GVC, -4.26%  , which is purchasing Ladbrokes, dropped 4.1%.

“Gambling companies have made hundreds of millions of pounds a year from fixed odds betting terminals and were hoping that the minimum stake would be towards the middle of the £2 and £50 consultation range,” said Rebecca O’Keeffe, head of investment at Interactive Investor, in a note.

“Although the consultation does not end until tomorrow, the suggestion that the response to the survey has been overwhelmingly in support of a cut to the minimum £2 means that this is indeed a significant threat to bookmakers,” she wrote.

Barclays PLC BARC, +2.14%  rose 1.8% following a Financial Times report that U.S. hedge fund Tiger Global has invested more than £1 billion in the London-based lender.

Shares of oil producers BP PLC BP., +0.92% BP, -1.17%  and Royal Dutch Shell PLC RDSB, +0.72% RDS.B, -0.26%  rose 0.8% and 0.6%, respectively, as oil prices headed higher.

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