FTSE 100 grasps to small gain as commodity shares rise

U.K. stocks edged higher Tuesday, as commodity shares worked on recovering ground lost in the prior session, while the pound moved modestly higher following U.K. jobs data that arrived before the Bank of England decides what’s next for monetary policy.

The FTSE 100 index UKX, -0.12% was up 0.1% at 7,608.51, with the basic materials and oil and gas groups among gainers. But the telecom and consumer goods groups were among declining sectors. On Monday, the index fell 0.8%.

The pound GBPUSD, +0.0453% rose to $1.3265 from $1.3236 late Monday in New York. Against the euro GBPEUR, -0.0354% , sterling bought €1.1297 versus €1.1302.

Commodity-related stocks advanced following a rough session for the sector on Monday that contributed to the FTSE 100 closing lower for the first time in three sessions.

Shares of oil producers were higher Tuesday with West Texas Intermediate crude prices CLQ8, -0.15% up, after oil futures on Monday tumbled more than 4%, to nearly $68 a barrel. September Brent crude LCOU8, -0.13% also moved slightly higher after a nearly 5% beating in the prior session. Oil prices were hit Monday by talk about a possible release of oil by the U.S. from global crude reserves and the potential for U.S. waivers on Iran oil sanctions.

Mining shares on Tuesday advanced after struggling Monday on concerns that slowing economic growth in China could hurt demand for industrial and precious metals, particularly as the U.S. engages in a trade fight with the world’s second-largest economy.

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Also: Here’s when Americans will start feeling the pain from escalating Trump-imposed tariffs

The FTSE 100 briefly slipped into the red in mid-morning action as the pound rose against the U.S. dollar in the wake of the U.K. jobs data, which largely met expectations as the unemployment rate stood at 4.2% and basic wages rose 2.7% between March and May.

The report will be under consideration by the Bank of England, which investors are watching for the possibility of an interest-rate rise by policy makers from 0.5%. Their decision is due to be released Aug. 2. BOE Gov. Mark Carney on Tuesday during Treasury testimony from the Farnborough Airshow reportedly said the U.K. leaving the European Union without a Brexit deal would be a “material event” for the outlook on interest rates, and a no-deal outcome would have “big economic consequences” for Britain.

U.K. Prime Minister Theresa May late Monday narrowly won support in the House of Commons for changes related to trade in the bill that will take the U.K. out of the EU. May accepted amendments sought by anti-EU members of her Conservative Party, including one that would keep the U.K. from collecting tariffs for the EU, and May’s move raised the ire of pro-EU members of her party.

Later Tuesday, investors will hear testimony from U.S. Federal Reserve Chairman Jerome Powell before the Senate Banking Committee.

“With the next round of EU negotiations not due until October, when the bulk of the U.K.’s exit from the EU will be hashed out, we expect the pound to remain out of favor in the FX world, and upside in the major GBP pairs to be limited,” said Kathleen Brooks, research director at Capital Index, in a note.

“Right now a rate hike in August is pretty much priced in, thus the BOE will have a limited effect on the pound in the lead up to the Aug. 2 meeting. Instead, the market is likely to look at this week’s data in terms of what it means for future rate hikes. So far, the data is not boosting the chances of a second rate hike before year-end, the market is pricing in only a 12% chance of rates being at 1% by year-end,” said Brooks.

In the oil sector, shares of Royal Dutch Shell PLC RDSB, +0.30%RDS.B, -1.36% rose 0.8% and BP PLC BP., -0.45%BP, -1.65% was up 0.4%.

Among miners, Antofagasta PLC ANTO, +1.36% rose 1.7%, Glencore PLC GLEN, +0.60%GLCNF, -1.35% picked up 1.4% and Rio Tinto PLC RIO, +0.84% gained 0.9%.  

Royal Mail PLC shares RMG, +3.22% turned higher to trade up by 3.5% after the postal-services provider backed its 2019 financial expectations after a 2% rise in underlying revenue in the first quarter.

British Land Co. PLC shares BLND, -1.44% fell 1.7% as the property developer warned that the retail market remains challenging. The company did say it plans to pay an interim dividend of 7.75 pence per share, up 3% from the first-quarter dividend a year ago.

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