FTSE’s 2017 gains vanish as pound rally hits stocks

THE FTSE yesterday reversed its gains of 2017 as the strong pound continued to hurt companies which generate most of their earnings overseas.

The index was down 0.5pc, or 33.14 points, to 7114.36, putting it below 7177.9, its value on the first day of trading in January.

The losses come as a result of the strengthening pound, which has held on to gains after hitting its highest level in months earlier this week, following the decision by Prime Minister Theresa May to hold a General Election on June 8.

Firms which generate their earnings in overseas currencies have been hit by the strength of the pound – which was trading at around $1,28 last night – because it means their earnings are worth less when brought back to the UK.

As a result, companies were hit, including international drinks company Diageo, which was down 1.9pc, or 43p, to 2201.5p, while global packaging firm Smurfit Kappa fell 1.8pc, or 37p, to 1988p. On the other hand, companies which primarily operate in the UK benefit from a strong pound because it reduces the cost of importing goods from abroad.

This saw Sainsbury’s jump 5pc, or 12.8p, to 267.4p, budget airline

EasyJet soar 5pc, or 53p, to 1117p, and retailer Next rise 3.2pc, or 134p, to 4321p.

Likewise, the domestically-focused FTSE 250 rose 0.6pc, or 119.85 points, to 19,417.76.

Troubled engineer Cobham saw nearly a tenth wiped off its market value after placing 683m shares to raise funds to pay off debt.

The shares were added as part of a rights issue announced at the end of March, where they were priced at 75p each, 41pc cheaper than its market value at the time.

The £512.4m has been raised to support the firm after debt payments made in 2016 missed targets due to lower than expected earnings. Shares slipped 8.7pc, or 12.1p, to 126.4p.

Electrical components manufacturer Acal shocked investors with an earnings upgrade in its update for the last quarter after taking in record orders.

The firm produces hardware for everything ranging from Nespresso machines to space-grade military hardware.

Revenues in the first three months of 2017 were 15pc ahead of last year, while order intake grew by 16pc. It now expects results for the full year to be ahead of expectations when they are reported on June 6. Shares were up 8.2pc, or 19.4p, to 254.4p.

Drug discovery and development firm E-Therapeutics tanked after reporting a hefty loss for the year ended January 31. The firm lost £16.3m compared to £11.6m the previous year.

Its drug discovery spend for the year increased to £7.6m from £4.4m, although development costs fell from £5.6m to £3.3m.

The firm said it addressed the additional discovery spend by cutting its total number of projects from 12 to six. This cut costs by more than £2m in the second half. The shares sank 8.1pc, or 0.75p, to 8.5p. Symphony Environmental Technologies had a blinding session after Saudi Arabia made biodegradable plastic compulsory for many industries.

The firm, a specialist in environmentally-friendly plastics, has been selected as an authorised supplier by the Saudi authorities.

Symphony said its sales team is now active throughout the country. Saudi’s sustainable plastic industry is expected to grow by 6pc a year for five years. Company shares rose 20.5pc, or 2p, to 11.75p.