FTSE 100 ends lower, hampered by prospect of faster Fed rate hikes

U.K. stocks closed lower Wednesday, finishing up February with a monthly loss, as investors focused on the prospect of rising borrowing costs in the U.S. after comments from new Federal Reserve Chairman Jerome Powell.

A slowdown in factory activity in China, a key market for London-listed metals producers, also put pressure on Londons benchmark.

How markets are moving

The FTSE 100 index
UKX, -0.69%
fell 0.7% to end at 7,231.91. On Tuesday, the London gauge slipped 0.1%.

For February, the FTSE 100 gave up 4%. That marked its worst monthly performance since August 2015, according to FactSet.

The pound
GBPUSD, -0.8916%
fetched $1.3792, down from $1.3908 late Tuesday in New York, as traders eyed news about a European Union document laying out Brexit terms. It was helping to reignite a debate over Northern Irelands future.

Whats driving markets

U.K. blue-chip equities came under pressure, echoing action on European
SXXP, -0.71%
and Asian markets
NIK, -1.44%
HSI, -1.36%
, after a selloff in stocks on Wall Street on Tuesday. U.S. stocks were mixed on Wednesday, midway through their session.

Those losses came after the Feds Powell told congressional lawmakers that the U.S. economic outlook has strengthened since December. That was interpreted as a sign the Fed may raise interest rates four times this year, instead of three times as it has previously signaled. Powell will testify before the Senate Banking Committee on Thursday.

Read: 4 financial-market takeaways from Fed chief Jerome Powells debut

Persistent worries about higher borrowing rates have unsettled global markets this month, contributing to the FTSE 100s likely loss for February. Investors focus on U.S. yields and Fed-rate policy, as higher U.S. interest rates tend to drive financial markets globally and as many companies do business in the U.S.

Powells testimony helped drive the dollar
DXY, +0.24%
higher, which in turn pressed down on prices of metals denominated in the U.S. currency, such as copper
HGK8, -1.63%
. U.K. stocks of miners dropped Wednesday, tracking that move lower.

The mining sector was also under pressure from data showing the pace of growth in Chinas manufacturing activity fell sharply in February . China is a major buyer of both industrial and precious metals.

What strategists are saying

It is becoming increasingly clear that global stocks still remain highly sensitive to the prospects of rising inflation and interest-rate fears. With Powells testimony fuelling market speculation of higher U.S. interest rates this year, stock markets remain exposed to downside risks, as equity bears lurk in the background, said Lukman Otunuga, research analyst at FXTM, in a note.

Stock movers

ITV PLC shares
ITV, -7.62%
slid 7.6% after the broadcasters pretax profit of 拢500 million ($697.1 million) fell short of a FactSet consensus estimate of 拢558 million.

Taylor Wimpey PLC shares
TW., -4.00%
dropped 4% as the home builder posted a 6.9% fall in 2017 pretax profit.

Admiral Group PLC shares
ADM, -4.56%
fell 4.6%. They erased an earlier gain that came as the insurance company announced its 2017 profit rose 45%.

In the mining group, Anglo American PLC
AAL, -3.33%
fell 3.3%, Antofagasta PLC
ANTO, -3.95%
lost 4% and BHP Billiton PLC
BLT, -2.68%
BHP, -1.95%
BHP, -1.96%
shed 2.7%.

Shares in Tesco PLC
TSCO, +1.79%
closed 1.8% higher after the supermarket chain said its shareholders and Booker Group PLC
BOK, +1.61%
holders approved the companies $5.5 billion merger.

In other developments, electronics retailer Maplin and Toys R US UK have each collapsed into administration, according to media reports Wednesday, putting roughly 5,500 jobs from both companies at risk.

Related Topics United Kingdom London Stock Exchange London Markets Bank of England Europe European Markets

Quote References UKX -50.54 -0.69% GBPUSD -0.0124 -0.8916% SXXP -2.73 -0.71% NIK -321.62 -1.44% HSI -423.94 -1.36% DXY +0.22 +0.24% HGK8 -0.05 -1.63% ITV -13.20 -7.62% TW. -7.75 -4.00% ADM -88.00 -4.56% AAL -61.40 -3.33% ANTO -35.80 -3.95% BLT -40.80 -2.68% BHP -0.93 -1.95% TSCO +3.70 +1.79% BOK +3.60 +1.61% Show all references
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FTSE 100 Index GBP FTSE Indices: UKX 7,231.91 -50.54 (-0.69%)

Volume 0
Open 7,282
High 7,293
Low 7,232
P/E Ratio 0
Div Yield 0
Market Cap N/A

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