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LONDON MARKETS : FTSE 100 Slips, As Stronger Pound Offsets Next Rally

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01/03/2018 | 10:15am CEST

By Sara Sjolin, MarketWatch

U.K. construction PMI on deck at 9:30 a.m. in London

U.K. stocks swung between small gains and losses on Wednesday. The major London benchmark was being pulled one way by a rally for the retail sector after an upbeat trading update from Next PLC, and in the other by continuing gains for the pound.

What are markets doing: The FTSE 100 index slipped 0.1% to 7,642.50, adding to a 0.5% loss from Tuesday, the first trading session of the year.

The pound continued higher against the dollar, buying $1.3597, compared with $1.3589 late Tuesday in New York. Sterling is now trading around its highest level since late September, partly due to a broad-based dollar selloff.

What is driving the markets: Retailers helped stem losses for the FTSE on Wednesday after Next PLC (>> Next) said its pre-Christmas sales got a boost from the cold weather . The clothing and home goods company said online sales performed particularly well in the 54-day period to Dec. 24, jumping 13.6% on the year. Total sales for the period rose 1.5%.

The upbeat trading update also included a boost to Next's guidance. The retailer said it now expects to report pretax profit of GBP725 million ($983 million) for the year to January 2018 -- an improvement on its previous guidance of GBP717 million.

Next shares rallied 9.5%, topping the list of FTSE advancers.

However, the appreciating pound kept a lid on the optimism in London on Wednesday, weighing on the index's big multinationals. As around 75% of revenues for the index are made overseas, an appreciation in sterling hits profits when converted back into the U.K. currency.

Attention should turn later to the U.K. construction purchasing managers' index, due at 9:30 a.m. London time, or 4:30 a.m. Eastern Time.

Stock movers: Among retailers, shares of Marks & Spencer Group PLC (>> Marks & Spencer Group) (>> Marks & Spencer Group) added 2.6%, while Primark-parent Associated British Foods (>> Associated British Foods) (>> Associated British Foods) rose 2.7%.

Among pound-sensitive companies, shares of tobacco major Imperial Brands PLC (>> Imperial Brands PLC (ADR)) (>> Imperial Brands PLC (ADR)) fell 1.2%, consumer-goods giant Reckitt Benckiser Group (>> Reckitt Benckiser) (>> Reckitt Benckiser) lost 0.9%, and British American Tobacco PLC (>> British American Tobacco) (>> British American Tobacco) dropped 0.8%.

Outside the FTSE 100, Carillion PLC (>> Carillion) lost 3.2% after the construction company said it is being investigated by the Financial Conduct Authority in connection with the "timeliness and content of announcements" made by Carillion between December 2016 and July 2017.

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