UK shares muted on receding rate cut bets; AstraZeneca gains By Reuters

By Shristi Achar A

(Reuters) -British equities started the week on a sombre note as fading hopes of interest rate cuts by global central banks weighed on sentiment, although gains in AstraZeneca (NASDAQ:) on the U.S. FDA’s approval for its lung cancer drug capped losses.

The blue-chip held its ground at 7,710.98 points as of 0850 GMT on Monday, while the mid-cap was flat at 19,185.22 points.

Both indexes snapped a two-week losing streak last week amid investors optimism about an early interest rate cut from the Bank of England after domestic economic data signalled slowing inflation.

However, souring rate cut prospects globally have dented the bets, with money markets now pricing in around 68 basis points cut from the central bank this year, compared with around 72 bps last week. [0#BOEWATCH] [MKTS/GLOB]

“With a key inflation reading, the producer prices index, coming in hotter than expected on Friday, investor hopes of rapid cuts to interest rates by the Federal Reserve have cooled off, leading to more risk-off sentiment,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown (LON:) in a note.

Aiding the dour mood, BoE chief economist Huw Pill said on Friday that so far he had seen only “quite modest and tentative evidence” that inflation would fall back to and stay at the central bank’s 2% target.

Base metal miners shed 1.3% and were among the top sectoral decliners, tracking weaker prices as the dollar steadied. [MET/L]

AstraZeneca, however, rose 3.4% after a combination of the drugmaker’s cancer drug Tagrisso with chemotherapy to treat a type of lung cancer was approved by the U.S. Food and Drug Administration on Friday.

Among other stocks, Currys (LON:) soared 33.1% after Chinese e-commerce group JD.com said it was evaluating a takeover of the British electricals retailer and laying the ground for a bidding war after the group rejected a rival 700 million pound ($883 million) deal.