By Dow Jones Business News,
June 17, 2014, 12:34:00 PM EDT
By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- U.K. stocks broke a two-day losing streak and moved higher on Tuesday, after weaker-than-
expected inflation data for May eased pressure on the Bank of England to hike interest rates.
The FTSE 100 index closed 0.2% higher at 6,766.77, supported by the latest consumer-price data from the Office for
The ONS reported annual inflation of 1.5% last month, down from 1.8% in April and missing expectations of a 1.7%-1.8%
print. The lower-than-forecast growth in consumer prices could ease pressure on the BOE to raise interest rates, as
tighter monetary policy tends to add downward pressure on inflation.
After a string of solid data in the U.K. -- including strong economic growth and a rapid decline in unemployment --
economists have speculated about when the U.K. central bank will start to hike rates in response to the better economic
BOE Governor Mark Carney last week surprised most market observers and said during the Mansion House speech that
higher rates could come sooner than markets currently expect. The comments sent the pound (GBPUSD) rallying, with the
currency briefly breaching the $1.70 on Monday for the first time since 2009.
After the inflation data on Tuesday, the pound fell to $1.6963, down from $1.6983 in late North American trade on
Meanwhile, another report from the ONS showed U.K. house prices jumped 9.9% in the year to April, up from 8% in the
year to March.
"The divergent data will further complicate the discussion about the appropriate timing of the first increase in
interest rates from their current record low," Chris Williamson, chief economist at Markit, said in a note.
Investors will get insight into rate discussions at the BOE when minutes from its June policy meeting are released on
Wednesday. Expectations are mixed, with some economists suggesting that one or two of the Monetary Policy Committee
members voted in favor of hiking rates in June. Read: Time to read the BOE's tea leaves on rate hikes
"While we expect a split vote in the near-term future, it is in our view more likely to happen in the next month or
two," analysts at UBS said in a note on Tuesday. "Nonetheless, we would advocate caution heading into the latest
Among notable stock movers in London, shares of Whitbread PLC added 2.2% after the hotel and restaurant operator
reported a 6.9% rise in first-quarter comparable sales, boosted by strong customer demand at both its Premier Inn and
Costa Coffee divisions.
Shares of Shire PLC put on 3.5% after Reuters reported that the drug maker has hired investment bank Citi in
preparation for potential takeover approaches.
Wm. Morrison Supermarkets PLC gained 2.3% after the company it is cutting 2,600 jobs as part of a plan to simply its
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