London close: FTSE 100 lower as sterling gains on rate-hike expectations

London stocks got off to a positive start but a firming sterling on higher UK rate-rise expectations and ex-dividend companies ultimately turned the market south.

At the close of the session, the FTSE 100 was down 0.51% to 7,350.32, and the FTSE 250 was 0.67% lower at 19,346.37. Equities indices in Europe were lower, the Dax, Cac 40 and Euro Stoxx 50 firmly.

Sterling was up about half a percent after BoE chief economist Andy Haldane told the BBC that the central bank needs to "look seriously" at the possibility of raising rates.

Haldane's comments came after BoE Governor Mark Carney appeared to be a dove turned hawk on interest rates, having suggested the day before that a rise might be needed.

"European markets are suffering today, with both the euro and pound pushing sharply higher off the back of recent hawkish comments," said IG market analyst Joshua Mahoney.

"The FTSE has declined sharply into the close, after a resurgent pound hit the highest level against the dollar in more than a month.

"Meanwhile, a strong showing for US financials isn't enough to keep their markets afloat," he added, pointing to early falls in the Dow, S&P 500 and Nasdaq.

In the UK, BoE data showed mortgage approvals in May beat expectations.

Figures from the Bank of England revealed that mortgage approvals in the UK ticked up to 65,202 from 65,051, beating analysts' expectations of 64,000.

Looking more closely at the stocks, gold-specialist miners Fresnillo and Randgold Resources were down heavily. House builders faltered behind Persimmon and Taylor Wimpey.

Airlines easyJet and ex-dividend International Consolidated Airlines flew in lower. Consumer goods giants Unilever and Reckitt Benckiser were on the back foot. Pharmas, multiple supermarkets and retail were broadly out of favour, too.

Meanwhile, banks racked up healthy gains, underpinned by news that all 34 lenders in the second part of the US stress tests had passed.

HSBC was the standout riser as it got an added boost from an upgrade to 'overweight' at Morgan Stanley, with Barclays, Standard Chartered and Lloyds also in the black.

Heavily-weighted miners put in a solid performance as metals prices rallied thanks to a weaker dollar

"Copper has rallied to its highest level in nearly three months and it lifted the share price of BHP Billiton, Anglo American, Rio Tinto and Glencore," said David Madden, market analyst at CMC Markets UK.

"The London market would be much lower if it wasn’t for the rally in the miners," he added.

Ex-dividend Babcock has been awarded a new contract by the Norwegian Government to provide communities across Norway with "vital" air ambulance support. Ex-dividend Royal Mail fell as its stock went ex-dividend.

Mediclinic was also weaker after Morgan Stanley cut its stance on the stock to 'equalweight' from 'overweight'. Randgold Resources fell after an update on its Massaw gold project in Senegal.

Broadcaster Sky advanced amid news its £11.7bn takeover by 21st Century Fox will likely be referred to the Competition and Markets Authority for a full investigation.

Johnson Matthey was boosted by an upgrade to 'overweight' from 'equalweight' at Morgan Stanley, which bumped up the price target to 3,500p from 3,000p. Micro Focus was on the back foot as Credit Suisse reiterated its 'underperform' rating on the stock.

Tesco ticked higher as it gave the CMA a hurry-along over its proposed merger with wholesale group Booker, first announced on 27 January.

Market Movers

FTSE 100 (UKX) 7,350.32 -0.51%
FTSE 250 (MCX) 19,346.37 -0.67%
techMARK (TASX) 3,509.67 -1.69%

FTSE 100 - Risers

HSBC Holdings (HSBA) 715.50p 4.24%
Sky (SKY) 988.00p 3.29%
Rio Tinto (RIO) 3,232.50p 2.44%
Glencore (GLEN) 290.40p 2.24%
Antofagasta (ANTO) 804.50p 2.09%
Anglo American (AAL) 1,029.00p 1.68%
Standard Chartered (STAN) 774.80p 1.48%
Smurfit Kappa Group (SKG) 2,360.00p 1.24%
Barclays (BARC) 205.50p 1.01%
Kingfisher (KGF) 306.40p 0.99%

FTSE 100 - Fallers

Micro Focus International (MCRO) 2,285.00p -3.79%
Coca-Cola HBC AG (CDI) (CCH) 2,251.00p -3.64%
International Consolidated Airlines Group SA (CDI) (IAG) 607.50p -3.57%
Shire Plc (SHP) 4,258.00p -3.36%
Fresnillo (FRES) 1,503.00p -3.34%
Burberry Group (BRBY) 1,653.00p -3.05%
Royal Mail (RMG) 415.10p -2.97%
Sage Group (SGE) 682.50p -2.85%
Convatec Group (CTEC) 314.80p -2.84%
Informa (INF) 672.00p -2.82%

FTSE 250 - Risers

Smith (DS) (SMDS) 481.10p 8.33%
IP Group (IPO) 135.80p 4.46%
Vedanta Resources (VED) 645.00p 4.03%
Evraz (EVR) 204.10p 4.03%
Petra Diamonds Ltd.(DI) (PDL) 107.00p 3.38%
OneSavings Bank (OSB) 381.60p 3.27%
Electra Private Equity (ELTA) 1,751.00p 2.70%
Petrofac Ltd. (PFC) 448.00p 2.49%
esure Group (ESUR) 303.00p 2.40%
Pets at Home Group (PETS) 163.70p 2.38%

FTSE 250 - Fallers

JD Sports Fashion (JD.) 364.20p -8.45%
Spectris (SXS) 2,492.00p -4.48%
Nex Group (NXG) 621.50p -4.16%
Renishaw (RSW) 3,545.00p -3.83%
Sirius Minerals (SXX) 31.57p -3.40%
Tate & Lyle (TATE) 674.00p -3.37%
Hochschild Mining (HOC) 271.40p -3.07%
Nostrum Oil & Gas (NOG) 488.00p -2.98%
Halma (HLMA) 1,095.00p -2.93%
Softcat (SCT) 378.70p -2.90%