LONDON: The British pound surged on Thursday (Sep 14) after the Bank of England hinted at an early interest rate hike, while most of the world's stock markets languished after disappointing Chinese economic data.
Asian equities declined on profit-taking, having rebounded earlier this week on easing North Korea tensions and relief that Hurricane Irma had not been as devastating to Florida as feared.
Hong Kong and Shanghai stocks each slid after a disappointing print on Chinese factory production, retail sales and state investment.
The negative sentiment spilled over into the eurozone where Frankfurt closed lower, but Paris remained, just about, in positive territory.
The Bank of England (BoE), as expected, maintained its key interest rate at a record-low 0.25 per cent despite surging inflation. But analysts remarked that despite no change to the rate at September's meeting, the tone of the minutes indicated that the BoE was readying for a rate rise.
"The accompanying statement contained some hawkish rhetoric with perhaps the most telling line revealing that all MPC members think that rate hikes will be faster than the current market pricing and this has provided the catalyst for a strong move higher in the pound," said David Cheetham, chief market analyst XTB online currency trading platform.
Sterling shot up from around US$1.32 when the decision was announced to over US$1.33 as the currency took "centre stage on the back of a hawkish Bank of England policy statement", as Forex.com analyst Fawad Razaqzada put it.
But that sent London's FTSE-100 tumbling as many companies listed on the blue-chip index make most of their earnings abroad, and a strong pound dampens profits when they are converted into sterling.
CHINA CAUSE FOR CONCERN
Analyst David Madden at CMC Markets UK said "the bullish momentum we witnessed at the start of the week has waned, and softer than expected economic data from China overnight has added to the negative move."
He added: "The cooling in the growth rate of Chinese industrial production, retail sales and fixed asset investment has given traders cause for concern."
The metals and mining sector was snagged by the data because China is a top consumer of many raw materials.
Across Europe steelmakers and miners felt the pain, with Arcelor Mittal, Thyssenkrupp, Anglo American, BHP Billiton, Glencore and Rio Tinto all seeing their share prices slide.
Sky shares slipped on news of a formal regulatory probe into 21st Century Fox's planned takeover of the British pay-television broadcaster.
Wall Street was slightly higher approaching midday in New York.
Key figures around 1540 GMT:
London - FTSE 100: DOWN 1.1 per cent at 7,295.39 points (close)
Frankfurt - DAX 30: DOWN 0.2 per cent at 12,540.45 (close)
Paris - CAC 40: UP 0.2 per cent at 5,225.20 (close)
EURO STOXX 50: UP 0.1 per cent at 3,526.48
New York - DOW: UP 0.1 per cent at 22,175.77
Tokyo - Nikkei 225: DOWN 0.3 per cent at 19,807.44 (close)
Hong Kong - Hang Seng: DOWN 0.4 per cent at 27,777.20 (close)
Shanghai - Composite: DOWN 0.4 per cent at 3,371.43 (close)
Euro/dollar: FLAT at US$1.1885
Dollar/yen: UP at 110.63 yen from 110.47 yen
Pound/dollar: UP at US$1.3396 from US$1.3208
Oil - Brent North Sea: UP 55 cents at US$55.71 per barrel
Oil - West Texas Intermediate: UP 95 cents at US$50.25