London stock market hits record high on slumping pound
The London stock market reached another record high yesterday as the pound slumped to the lowest level in three months on Brexit concerns. At the same time, eurozone indices were down across the board, taking their cue from Wall Street, which opened softer as it took a breather from last week’s gains, while the euro was steady against the dollar.
London’s benchmark FTSE 100 index reached an intra-day high of 7,239.26 points in morning deals, extending a record run higher that began ahead of the new year.
The pound tumbled yesterday after British Prime Minister Theresa May insisted at the weekend that Britain would have control over its borders after Brexit, suggesting she would be prepared to quit Europe’s trading zone to achieve it. “The latest slide has been in response to comments from May at the weekend, when she said Britain’s exit negotiations will ‘not be about keeping bits of membership’,” said Fawad Razaqzada at Forex.com
The pound dropped one cent against the dollar to $1.21 after May signaled in an interview with Sky News over the weekend that the UK is likely to leave the bloc’s single market in goods and services. She said Britain won’t try to keep “bits of membership” once it leaves. EU membership guarantees free movement of people, money, goods and services across its 28 countries.
The British government is interested in limiting immigration while retaining access to the EU market for its companies. But the EU says Britain cannot pick and choose what parts of EU membership it keeps.
Some traders read May’s comments in the interview to suggest she was prepared to pull Britain from the single market and have it trade with the EU as if it were any other country outside Europe, without any form of privileged status.
May denied setting Britain on the road to a “hard Brexit.” “I don’t accept the terms hard and soft Brexit,” she said. “What we’re doing is going to get (an) ambitious, good, best-possible deal for Britain.” The pound has dropped almost a fifth against the dollar since the June 23 vote.
“May’s comments suggest it will be a hard exit from the EU, as Britain seeks to control immigration and law-making among other things. Though the Brexit vote has only had a limited impact on the economy thus far, the uncertainty could weigh on business spending in the months ahead,” he said. May’s comments come as London prepares to invoke Article 50, which starts a two-year countdown to Britain exiting the European Union.
‘Back foot’
“Sterling is on the back foot yesterday after Theresa May’s comments were taken as a sign the UK government would prioritize immigration controls over single market access,” said Neil Wilson, senior market analyst at ETX Capital trading group. “Domestic populist politics trumps the trade card for now, it seems and that is weighing on the pound, whilst simultaneously giving another boost to the FTSE 100” and its listed multi-nationals including oil giants BP and Shell.
Elsewhere yetserday, Asian stock markets climbed after a strong preweekend lead from New York where two of the three main indices closed at record highs.
But Wall Street started the week slightly weaker. “There’s lots of turbulence, which is contributing to the more cautious tone at the start of the week,” said Patrick O’Hare of Briefing, predicting a “period of consolidation.” Investors are upbeat that US President-elect Donald Trump will introduce measures that will fire the world’s top economy.
Investors were looking ahead to a speech by Federal Reserve boss Janet Yellen on Friday, which would be pored over for clues about the bank’s outlook for its next interest rate hike. With Trump’s promises of big spending and tax cuts expected to fuel inflation, bets are on the Fed to hike rates at least three times this year, after December’s increase. — Agencies