British blue-chip stocks slumped Thursday following a three-day move higher, led lower in morning action by a plunge for British Gas parent Centrica PLC after its disappointing financial update.
Traders continued to ponder the Autumn Budget presented Wednesday by Chancellor of the Exchequer Philip Hammond, which included downgrades to the government’s forecasts for U.K. economic growth.
What markets are doing: The FTSE 100 index UKX, -0.44% fell by 0.5% to 7,381.14, giving up ground after rising 0.5% over the past three sessions to an almost two-week high. The gauge is up about 3% for the year, lagging the Stoxx Europe 600’s SXXP, -0.25% advance of 7% and the U.S. S&P 500’s SPX, -0.08% rally of 16%.
The pound GBPUSD, -0.2101% changed hands at $1.3311, down slightly from $1.3324 late Wednesday in New York. The currency is up about 0.7% for the week, stretching its year-to-date gain to nearly 8%. It remains well below the $1.50 level that it hit just before the U.K.’s June 2016 vote to leave the European Union, or Brexit.
What strategists are saying: “Although on the face of it the downgrade to the U.K. growth forecasts and the weak productivity theoretically should be bad news for sterling, the market is most likely pricing out the probability of a collapse in the government,” said Kathleen Brooks, research director at City Index, in a note.
“Hammond’s generally well-received performance is the first solid piece of good news for [Prime Minister] Theresa May after a torrid month,” she added.
Resignations by key cabinet ministers and a threatened rebellion from within her party’s own ranks were only two of the factors putting pressure on U.K. leader May and her government this month.
Stock movers: Centrica shares CNA, -13.66% dived 17% for the FTSE 100’s biggest drop after the utility company warned that its energy supply businesses have had a disappointing second half. It also gave a full-year adjusted earnings outlook that was below the market consensus.
Severn Trent PLC shares SVT, +1.51% gained 1% after the water company reported a slight rise in interim profit before tax and raised its dividend.
The Autumn Budget out yesterday whacked home-builder shares, as it included plans to move toward taking land from developers who fail to build houses. Those stocks were recovering somewhat early Thursday.
What else could help move markets: A fresh estimate on British third-quarter growth in gross domestic product is due at 9:30 a.m. London time, or 4:30 a.m. Eastern Time. Economists polled by FactSet expect a quarter-over-quarter expansion of 0.4% and year-over-year growth of 1.5%.