U.K. stocks edged lower Friday, as investors wrapped up trading for the month, with Barclays PLC shares losing ground and Royal Bank of Scotland PLC shares driving higher after financial updates.
Blue chips were also feeling the weight of a stronger pound, which held above $1.29 even after British economic growth slowed by more than expected in the first quarter. A higher pound can cut into earnings and revenue made overseas by multinational companies listed on the FTSE 100.
The FTSE 100
lost 0.5% to close at 7,203.94, trimming its weekly gain to 1.3%. For April, however, the London benchmark slid 1.6%, in part because the pound has surged more than 3% against the dollar over the month.
Growth deceleration: The U.K. economy grew 0.3% in the first quarter, missing a FactSet estimate of 0.4%. A slowdown in services activity, particularly retail, clipped growth, the Office for National Statistics said Friday. The economy in the fourth quarter of 2016 expanded by 0.7%.
“While the deceleration looks a little scary, the U.K.’s trend rate is [around] 0.4%. The expansion is entering its eighth year and the labor market is at full employment,” said Kallum Pickering, senior U.K. economist at Berenberg, in a note.
The preliminary first-quarter reading arrives ahead of the snap general election on June 8 and the start of Britain’s exit talks with the European Union.
But the pound
largely held to gains after the data, trading at $1.2945 compared with $1.2905 late Thursday in New York.
“Sterling didn’t go off a cliff, largely because an anodyne number had been priced in, but the weakest output since before the [Brexit] referendum has certainly added to the sense of uncertainty,” said Richard Berry, founder of Berry FX, in a note.
Banks in focus: Shares of Barclays
dropped 5.2%, on track for their worst session since the Brexit vote in June. The lender’s first-quarter net profit fell by more than half to 190 million pounds ($246 million), hurt by the cost of shedding its African business.
But in the same sector, Royal Bank of Scotland Group PLC
shares climbed 4.7% after the lender swung to a first-quarter profit of £259 million ($334.24 million)
Looking at other bank shares, Lloyds Banking Group PLC
ended up 0.3%. The U.K. government has cut its holding in the lender to 638.4 million shares, or 0.89% of its issued share capital. Lloyds, the U.K.’s biggest retail bank, was bailed out by taxpayers during the financial crisis.
Shares of Asia-focused lenders HSBC PLC
and Standard Chartered PLC
dropped 0.7% and 2.7%, respectively.
Bank stocks have a roughly 58% weighting on the FTSE 100’s financial sector, FactSet data show.
Other economic data: U. K. consumer sentiment weakened slightly in April, as British shoppers remained concerned about their own financial situation as well as the country’s economic prospects over the year ahead, a GfK U.K. survey showed Friday.