- NatWest down after warning that higher earnings may not last
- British retail sales rise for January
- FTSE 100 down 0.4%, FTSE 250 off 0.5%
Feb 17 (Reuters) - UK's FTSE 100 fell on Friday, with banking stocks leading losses after lender NatWest forecast dour earnings, and as investors gauged the prospects of further monetary policy tightening by the U.S. Federal Reserve to tame inflation.
The blue-chip FTSE 100 lost 0.4%, but is set to post a weekly gain of 1.3%.
The domestically-focussed FTSE 250 midcap index fell 0.5%, although it was on track to eke out a weekly gain of 0.3%.
Shares of NatWest tumbled 7.6% to reach the bottom of the index, after the British bank warned that rising interest rates may not deliver the long-lasting earnings bonanza investors hope for.
The broader banking sector slipped 0.8%.
UK markets were also taking cues from a gloomy global sentiment, triggered by U.S. data on Thursday that showed higher inflation and a drop in weekly jobless claims. The lacklustre data aided bets the U.S. Fed will stick to its aggressive tightening path.
"We're back to that kind of market behaviour where good news is bad news," said Andrea Cicione, head of strategy at TS Lombard.
"The market had shifted (away) from worrying about how high the terminal rate by the Fed would go, but the good data that's come out in recent weeks has shifted the emphasis back on the terminal rate."
Adding to central bank-related gloom, Bank of England Chief Economist Huw Pill said the central bank is likely to raise interest rates at a slower pace this year, but it needs to take care not to end its cycle of hikes too soon.
The internationally-focussed FTSE 100 recorded its highest closing level on Thursday, breaching the 8,000-point mark for the second time this week as upbeat corporate earnings and rising commodity prices have supported the index so far this year.
Data showed volumes of British retail sales unexpectedly rose in monthly terms in January, but the overall picture remained that of weak demand from inflation-hit consumers.
Reporting by Shashwat Chauhan in Bengaluru; Editing by Sherry Jacob-Phillips
Source: Reuters