FTSE 100 falls and pound rises as traders respond to talk of interest rate hike
London's blue-chip index remained in the doldrums and the pound marched higher as traders shifted their positions in response to a potential interest rate hike.
The FTSE 100 Index closed down 37.48 points at 7,350.32, as the financial markets continued to take their cues from Bank of England Governor Mark Carney, who hinted on Wednesday that rates could rise if wages firm and the economy is boosted by stronger business investment.
Multi-nationals stocks were suffering for a second straight session as the pound reached its highest level for more than a month against the greenback, breaking through the psychologically important 1.30 US dollar mark.
Shares in pharmaceutical giant Shire drifted down 148p to 4,258p and Diageo slipped 25.5p to 2,286p.
Some blue-chip firms, which report in US dollars or euros, can struggle on the FTSE 100 Index when the pound rises because their earnings suffer from a less favourable currency translation.
David Madden, market analyst at CMC Markets UK, said: " The FTSE 100 is down 0.25% as the hawkish comments from the Bank of England Governor yesterday, triggered a round of selling.
"Mark Carney, the head of the Bank of England, surprised traders by saying that the loose monetary policy could be tightened.
"Only last week Mr Carney delivered a very dovish speech, so yesterday's comments encouraged traders to rethink their long positions, and the jump in the pound also added to the sell-off."
The London-listed mining stocks helped soften the fall after a jump in the copper price inspired a rally across the sector.
Glencore climbed 6.4p to 290.4p, while Antofagasta and Anglo American rose by 16.5p to 804.5p and 17p to 1,029p respectively.
In Europe, Germany's Dax and the Cac 40 in France both plunged by 1.8%.
On the currency market, the pound was up 0.4% to 1.298 against the US dollar and flat versus the euro at 1.136.
Brent crude extended its gains, rising 0.6% to 47.6 US dollars a barrel, with a drop in US weekly oil production calming concerns over rampant oversupply in the market.
In UK stocks, Sky was among the biggest risers despite Culture Secretary Karen Bradley saying she was "minded" to refer Rupert Murdoch's £11.7 billion swoop for the broadcaster for further scrutiny.
Ofcom told the Secretary of State that the takeover attempt raised "public interest concerns" and she could refer the deal to the Competition and Markets Authority (CMA) for a fuller investigation on the grounds of media plurality.
However, she was "minded not to refer" the bid to a phase two investigation in relation to a "genuine commitment to broadcasting standards".
Shares in Sky were up more than 3%, or 31.5p, to 988p after analysts said it was still positive for both companies because it left the door open for a deal.
The biggest risers on the FTSE 100 Index were HSBC up 29.1p to 715.5p, Sky up 31.5p to 988p, Rio Tinto up 77p to 3,232.5p and Glencore up 6.4p to 290.4p.
The biggest fallers on the FTSE 100 Index were Micro Focus International down 90p to 2,285p, Coca-Cola HBC down 85p to 2,251p, International Consolidated Airlines Group down 22.5p to 607.5p and Shire down 148p to 4,258p.