By Carla Mozee, MarketWatch
Pound crosses above $1.32
U.K. stocks dropped Friday, with retailers and energy producers among those that lost ground, sending the London gauge of blue-chip stocks to its lowest close since late September.
Equities also felt the weight of a rising pound.
What markets are doing: The FTSE 100 index slumped 0.7% to 7,432.99, the lowest close since Sept. 29, FactSet data showed. No sector managed a gain, while the health care and telecom sectors printed the biggest losses. On Thursday, the benchmark fell 0.6% .
For the week, the London benchmark fell 1.7%, the biggest such decline since mid-September. The index on Nov. 6 was driven up to a record close.
This week "there's been a dry-as-bones economic calendar and that's given investors a moment to pause, look at where the markets and reassess...maybe they shouldn't be quite as high as they are," said Connor Campbell, financial analyst at Spreadex, in an interview.
"Last week with the Bank of England, the Federal Reserve, nonfarm [payrolls], it was almost pure reaction and now this week investors have had time to reflect and that's not necessarily a good thing for the market," he said.
The pound late Friday traded at $1.3203, up from $1.3137 late Thursday in New York.
The yield on the 10-year gilt rose 7 basis points to 1.34%.
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Retail pain continues: A tough week for retail stocks continued Friday, after the release of research that showed British consumer spending is slowing.
Burberry (>> Burberry Group) (>> Burberry Group) fell 2.3%, with UBS downgrading its shares to neutral from buy. The stock on Thursday tumbled 10% after the British luxury goods retailer warned it doesn't expect sales growth until fiscal 2021 .
Marks & Spencer Group (>> Marks & Spencer Group) slumped 1.9% on Friday, leaving its shares down 2.8% for the week. Next PLC (>> Next) turned higher to close up 0.2%, but they ended the week down 2.1%.
What's moving markets: U.K. industrial and manufacturing figures came in stronger than anticipated, giving a boost to the pound against the U.S. dollar. Industrial output expanded by 2.5% in September year-over-year, said the Office for National Statistics, above expectations of 1.8%.
That propelled the pound to rise as high as $1.3230, the highest since Nov. 1. But sterling strength can hurt shares of multinational companies on the FTSE 100, as earnings made overseas by those companies can be squeezed when converted back into U.K. currency.
"Next week is busy in terms of data for the pound, with inflation and retail sales," said Campbell. He said economic figures over the past couple of months have been assessed in terms of if the Bank of England would decide to raise interest rates. The bank did lift the key rate to 0.5% from 0.25%.
"The Bank of England has [now] made it clear there's not going to be a rate hike anytime soon, so it will be interesting to see what the pound does," on next week's data, he said.
Concerns about a possible delay to tax cuts in the U.S . lingered. Those worries helped push equity markets in the U.K., in Europe and in Asia lower Friday, following a selloff in the U.S. on Thursday. The prospect of lower taxes and other stimulus put forward by the Trump administration has at times bolstered equity markets over the past year.
Stock movers: Among multinational companies, drugmakers GlaxoSmithKline (>> GlaxoSmithKline) (>> GlaxoSmithKline) and AstraZeneca PLC (>> AstraZeneca) fell 2.1% and 1.9%, respectively, and cruise operator Carnival PLC (>> Carnival) gave up 1.7%.
Shares of oil producer BP PLC (>> BP) (>> BP) and Royal Dutch Shell PLC (>> Royal Dutch Shell Plc) (>> Royal Dutch Shell Plc) fell 1.5% and 1.3%, respectively, as oil prices pulled back from two-year highs.
Retail distribution group Bunzl PLC (BZLFY) dropped 6.5% after Morgan Stanley outlined risk from Amazon.com Inc.'s (>> Amazon.com) business-to-business distribution plan.