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London Markets: London stocks struggle and pound gives up gains

London stocks posted moderate losses on Friday, making the FTSE 100 one of the best performing indexes in Europe, as investors continued to parse the Bank of England policy meeting a day earlier.

The FTSE 100
UKX,
-0.24%

slipped 0.1% to 7,069, setting up for a weekly gain of 1.5%. While losses across Europe were deeper, the main London index was supported by some strength fading for the U.K pound
GBPUSD,
-0.36%
,
which was down 0.3% to $1.368 after climbing above $1.37 on Thursday.

The pound earlier rose after the market took a hawkish view of the BoE decision, in which one member defected to the camp of wanting to end bond purchases immediately, and a majority said a rate rise could occur as early as this year. The Federal Reserve also met this week, delaying a tapering of its bond purchases, but with a hawkish undertone as well.

“Persistent and rising inflation would suggest that central banks have to act soon to get the situation under control which means interest rate hikes sooner rather than later,” said Russ Mould, investment director at AJ Bell, in a note to clients. “However, there is a bleak winter ahead given pressure on energy prices, supply chain problems and a sharp hike in the cost of living.”

“All these factors threaten economic growth, so central banks have a fine line to tread – raise rates too quickly and the economy could falter, but don’t act and risk inflation racing away,” said Mould.

Data out Friday showed confidence among British consumers took a hit in September, falling to a five-month low, amid worries over inflation and government support ending. GfK’s consumer-confidence barometer came in at minus 13 in September, down five points from August and missing economists expectations.

Rolls-Royce Holding
RR,
+5.33%

was a top gainer, with shares up 5%. Analysts Andrew Gollan and Ross Law at Berenberg published a positive note on the company Thursday, saying the U.S. decision this week to open its borders for vaccinated travelers was a “more robust recovery in long-haul travel, which has lagged behind domestic travel markets,.

AstraZeneca shares
AZN,
+1.56%

AZN,
+2.49%

were another top gainer, with shares up 3.4% after the pharmaceutical company reported positive eresults for a Phase 3 trial of its Lynparza drug to treat prostate cancer.

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