Stall in Brexit talks sends FTSE 100 to a new high
The FTSE 100 hit a new closing high on Thursday after a “disturbing deadlock” in the latest round of Brexit talks triggered a sharp sell-off of the pound.
Britain’s blue-chip stock market, which features the UK’s biggest companies, closed up 22 points, or 0.3%, at 7556.24 points. The rise in the UK’s leading index reflected a weaker pound, which makes British goods and services cheaper abroad and tends to boost the share price of multinational companies with a large proportion of foreign earnings.
At one point the pound was down as much as a cent against the dollar at $1.3123 after the EU’s chief Brexit negotiator, Michel Barnier, said talks over Britain’s divorce bill were in a “very disturbing state of deadlock”.
Currency traders reacted swiftly to the lack of progress, also sending sterling down to a four-week low against the euro at €1.109, although the pound later recovered after markets closed. The Dow Jones also rose yesterday.
Multinational exporters were among the FTSE 100’s biggest risers yesterday, with luxury fashion chain Burberry gaining 2.7% and consumer goods group Unilever rising by 2.1%.
Energy companies also helped to push the index to a record closing high. SSE and Centrica, two of Britain’s biggest energy providers, gained 2.5% and 1.9% respectively, after it emerged that the government’s new price cap is unlikely to come into effect until 2019. Analysts said the new closing high was not a vote of confidence in the UK economy. “The bullish move was achieved for the wrong reasons, as the dip in the pound on the back of the stalled Brexit talks helped the British index,” said David Madden, analyst at CMC Markets.
Joshua Mahony, market analyst at IG, said: “The continued ascent of the FTSE has had much to do with the negative effect of the disjointed Brexit negotiations, with daily updates seemingly highlighting just how unsuccessful the initial rounds of talks have been.”
Yesterday’s performance beat the FTSE 100’s previous closing high of 7,547 points set in June, but it was still below the record intraday high of 7,598.99. “The UK stock market continues its winning streak despite concerns over economic performance and the unfolding Brexit process. The question is whether the market’s strong run means it’s fit to burst,” said Laith Khalaf, senior analyst at financial services group Hargreaves Lansdown.
“Valuations in the UK stock market look reasonable, neither particularly cheap, nor particularly expensive. That means, in the short term, the stock market can turn in either direction without defying the laws of statistics.”
Shares in the luxury fashion chain Burberry rose 2.7% yesterday as a falling pound boosted exporters