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FTSE hits bump on sterling jump after Bank of England rate hike signal

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09/14/2017 | 06:26pm CET
People stand and sit outside the London Stock Exchange in Paternoster Square, London

Britain's top share index dropped to a four-month low on Thursday as sterling surged after the Bank of England signalled that it was likely to raise rates in the coming months, weighing on the FTSE 100's predominantly dollar-earning constituents.

The FTSE 100 <.FTSE> ended the session 1.1 percent lower at 7,295.39 points, underperforming the broader European market which closed in positive territory.

The Bank of England's policymakers voted to keep rates on hold at a record-low 0.25 percent, and said that the central bank was likely to raise interest rates in the coming months if the economy and price pressures keep growing.

Sterling jumped more than 1 percent, putting pressure on big, international firms such as British American Tobacco (>> British American Tobacco) and Diageo (>> Diageo) which source a large part of their revenues from overseas.

The drop in the pound after Britain voted to leave the European Union last June boosted the FTSE 100, as its dollar-earning constituents received an accounting boost when converting their revenues back to pounds.

Some investors, however, were more cautious on the outlook for rate hikes.

"Given downside risks to global and UK growth as well as to inflation as the impact of sterling depreciation fades over the next few months, I think this hawkish shift will not last," Anna Stupnytska, global economist at Fidelity International, said.

Financials also fell, with HSBC (>> HSBC Holdings) and Barclays (>> Barclays) dropping 1.5 percent and 0.9 percent respectively, while mining stocks saw some sizeable declines as the price of copper slid on the back of disappointing data from China.

Shares in Rio Tinto (>> Rio Tinto), BHP Billiton (>> BHP Billiton Plc), Glencore (>> Glencore) and Anglo American (>> Anglo American) were all down between 2.4 percent to 3.4 percent.

Morrisons (>> Wm Morrison Supermarkets), Britain's No. 4 supermarket, fell about 5 percent after publishing first-half results.

British fashion chain Next (>> Next), however, was a bright spot with a 13 percent surge in its shares after it lifted its guidance, saying that it had managed to cushion the inflationary impact of a weak pound.

"Next remains a well-invested business that in our view has the operational and cost flexibility to deal with structural pressures posed by online, supported by strong and consistent cash generation," analysts at Investec said in a note, reiterating their "buy" rating on the stock.

(Reporting by Julien Ponthus and Kit Rees)

By Kit Rees

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Financials ($)
Sales 2017 25 873 M
EBIT 2017 6 015 M
Net income 2017 3 141 M
Debt 2017 5 383 M
Yield 2017 4,18%
P/E ratio 2017 10,10
P/E ratio 2018 11,45
EV / Sales 2017 1,53x
EV / Sales 2018 1,49x
Capitalization 34 159 M
Duration : Period :
Anglo American Technical Analysis Chart | AAL | GB00B1XZS820 | 4-Traders
Technical analysis trends ANGLO AMERICAN
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus HOLD
Number of Analysts 24
Average target price 21,6 $
Spread / Average Target -11%
EPS Revisions
Mark Cutifani Chief Executive Officer & Executive Director
Stuart John Chambers Chairman
Anthony Martin O'Neill Director & Technical Director
Philip Roy Hampton Senior Independent Non-Executive Director
Jack Edward Thompson Independent Non-Executive Director
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