The British pound surged and the London FTSE sagged Thursday after the Bank of England hinted at an early interest rate hike, while global stocks were mixed following disappointing Chinese economic data.
The Bank of England (BoE), as expected, maintained its key interest rate at a record-low 0.25 percent despite surging inflation. But analysts said despite no change to the rate, the tone of the statement indicated the central bank 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 $1.32 when the decision was announced to over $1.34 as the currency took "center stage on the back of a hawkish Bank of England policy statement," as Forex.com analyst Fawad Razaqzada put it.
The gain in the British currency weighed on stocks in London, with the FTSE 100 losing 1.1 percent.
US stocks were mixed, with the Dow edging to a fresh record, while the S&P 500 and Nasdaq both retreated from consecutive peaks due to weakness in leading tech shares such as Apple, Facebook and Google-parent Alphabet.
An exception to the tech pullback was Tesla Motors, which rose 3.1 percent after chief executive Elon Musk announced the electric car maker would unveil a heavy transport truck next month. The launch is tentatively slated for October 26.
Analysts cited unexpectedly weak Chinese industrial and retail sales data as a drag on many markets, especially Asia.
Output at factories and workshops expanded six percent last month, the lowest recorded this year and well below the 6.6 percent forecast.
Retail sales slowed slightly, growing 10.1 percent, while fixed asset investment increased 7.8 percent in the January-August period -- both well below expectations.
"The main culprit was a slowdown in infrastructure investment, which also weighed on industrial output," Julian Evans-Pritchard, China economist at Capital Economics, said in a research note.
Equity markets in Tokyo, Shanghai and Hong Kong all retreated.
- Key figures around 2050 GMT -
New York - DOW: UP 0.2 percent at 22,203.48 (close)
New York - S&P 500: DOWN 0.1 percent at 2,495.62 (close)
New York - Nasdaq: DOWN 0.5 percent at 6,429.08 (close)
London - FTSE 100: DOWN 1.1 at 7,295.39 points (close)
Frankfurt - DAX 30: DOWN 0.1 percent at 12,540.45 (close)
Paris - CAC 40: UP 0.2 percent at 5,225.20 (close)
EURO STOXX 50: UP 0.1 percent at 3,526.48
Tokyo - Nikkei 225: DOWN 0.3 percent at 19,807.44 (close)
Hong Kong - Hang Seng: DOWN 0.4 percent at 27,777.20 (close)
Shanghai - Composite: DOWN 0.4 percent at 3,371.43 (close)
Euro/dollar: UP at $1.1913 from $1.1885
Dollar/yen: DOWN at 110.26 yen from 110.47 yen
Pound/dollar: UP at $1.3401 from $1.3208
Oil - Brent North Sea: UP 31 cents at $55.47 per barrel
Oil - West Texas Intermediate: UP 59 cents at $49.89 per barrel