LONDON: The London stock market slid Friday as investors shrugged off news of an apparent terror attack in the British capital and instead took their cue from the surging pound.
Sterling shot above $1.36 when a Bank of England policymaker signalled a rate hike for "the coming months", after UK borrowing costs were this week left on hold at a record-low 0.25 percent.
Markets reacted little meanwhile to an attack on a London Underground train at Parsons Green, southwest London, which police are treating as a terrorist incident. A number of people were injured.
"Londoners and markets alike take these sorts of incidents in their stride," ETX Capital analyst Neil Wilson told AFP.
"The FTSE's drop today is by and large about the pound's rally, as that depresses the foreign earnings of lots of the big blue chips."
- 'Rampant pound' -
In afternoon deals, the British capital's FTSE 100 index of top companies slid 1.2 percent as sterling rebounded to $1.3616 -- the highest level since June 2016.
"The FTSE is suffering at the hands of a rampant pound," added IG analyst Joshua Mahony.
Eurozone trading was muted on Friday with Frankfurt and Paris stocks slipping ahead of the weekend pause.
The pound was catapulted higher after the Bank of England's most dovish rate-setter revealed that he may back a hike "as early as in the coming months".
Gertjan Vlieghe, a member of the BoE's Monetary Policy Committee (MPC), said he has been "struck" by a series of developments in the British economy, including high inflation, employment growth, slight wage increases and stronger spending growth.
"Until recently, I thought the appropriate response of monetary policy was to be patient, given modest growth and subdued underlying inflationary pressure. But the evolution of the data is increasingly suggesting that we are approaching the moment when bank rate may need to rise," Vlieghe said.
"If these data trends of reducing slack, rising pay pressure, strengthening household spending and robust global growth continue, the appropriate time for a rise in bank rate might be as early as in the coming months."
The possibility of a hike as early as the next BoE policy meeting in November comes as other central banks consider similar moves with world growth slowly improving.
Meanwhile, Wall Street opened mixed despite disappointing economic data, with the Dow adding 0.2 percent.
Sagging sales of autos held down overall US retail sales in August, which fell 0.2 percent overall, as American consumers bought goods and services at their slowest pace in six months.
Meanwhile output at US factories plunged 0.9 percent in August due to the big hit from Hurricane Harvey that shut down huge parts of the nation's oil refining, the Federal Reserve reported Friday.
- North Korea missile -
Investors meanwhile brushed off concerns over North Korea's latest missile launch.
Pyongyang fired its second rocket over Japan's Hokkaido in less than a month, just days after the UN Security Council imposed sanctions in response to its nuclear test.
Analysts said the rocket travelled further than any other it has fired, adding to fears about the North's ability to strike the US mainland with an atomic bomb.
The news rattled Asian markets but by the end of the day the losses had either been sharply cut back or reversed, with Seoul's Kospi closing 0.4 percent higher.
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