By Carla Mozee and Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- The FTSE 100 index ended flat on
Wednesday, with hawkish minutes from the Bank of England
outweighing waning worries over Greece's debt deal.
The benchmark ended at 6,898.08, just 0.05 points lower than
Tuesday's close, when it hit the highest level since December
1999.
U.K. stocks opened the day in positive territory on hopes Greece
and its European partners will hammer out a debt deal before the
country's current bailout program ends on Feb. 28. Greek government
officials said the country will submit a request for a
loan-extension agreement on Thursday.
Hawkish BOE: However, U.K. stocks started to head lower after a
round of upbeat labor-market data and the Bank of England's minutes
from its Feb. 5 meeting. While policy makers voted unanimously to
leave the key interest rate at 0.5%, two of them said the decision
was a "finely balanced" call, and that "there may well be a case"
for a rate increase later in 2015.
Jobs data: Meanwhile, data showed U.K. unemployment dropped to
5.7% in the three months through December -- the lowest in almost
six years -- from 5.8% a month before. Salaries grew at the fastest
pace in a year and a half, a fresh sign that a long squeeze on
living standards is coming to an end.
The solid labor-market report provides the BOE with more
ammunition to eventually raise interest rates, which isn't
well-received by stock investors.
"Consistent with the Inflation Report press conference last
week, the minutes recognized the theoretical risks from low
inflation, but preferred to focus more fire on the boost to growth
that cheaper oil provides," said Rob Wood, chief U.K. economist at
Berenberg, in a note. "In our view, a deflationary spiral is
unlikely in the UK, especially given the tightening labor
market."
Sterling: The pound (GBPUSD) recaptured the $1.54 level against
the U.S. dollar after the arrival of U.K. labor-market data and the
BOE report. The pound was buying $1.5429, versus $1.5354 late
Tuesday.
Stocks: Vodafone Group PLC (VOD) added the most pressure on the
FTSE, down 2.5%. The wireless telecom company said chief technology
officer Stephen Pusey, who is retiring this summer, will join the
board of Centrica PLC . Centrica shares rose 0.4%.
Other decliners included Coca-Cola HBC AG , which fell 3.1%
after the bottler posted a decline in fourth-quarter net profit and
warned of a persistent volatile environment this year.
Tesco PLC (TSCDY) erased an earlier gain and fell 0.7%. Late
Tuesday, Britain's largest supermarket chain named John Allan as
its new chairman. His tenure will begin on March 1 as he takes over
from Richard Broadbent. The company is undergoing a sweeping
overhaul under the leadership of new chief executive, Dave
Lewis.
Allan currently serves as chairman of home builder Barratt
Developments PLC and deputy chairman of Dixons Carphone PLC .
Deutsche Bank on Tuesday upgraded Tesco to a buy rating from
hold, saying the company "has shown three months of improved sales
performance and the discounters share growth has slowed."
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