Pound gives up gains after Brexit warning

LONDON

THE pound gave up gains yesterday after the Bank of England’s chief economist Andy Haldane spoke out in favour of heavyhitting stimulus in August and warned of a bleak outlook for a post-Brexit Britain.

Sterling was down 1.01 per cent against the dollar at 1.31. Against the euro, the pound slumped 0.57 per cent to 1.19.

The pound had rallied to a two-week high on Thursday, touching $1.34 , following the Bank of England’s decision to hold interest rates at 0.5 per cent.

However, Mr Haldane said he favoured a “sledgehammer” approach to stabilising the economy as he warned unemployment could rise and the economy slow down in the wake of Britain’s decision to quit the European Union. “This monetary response, if it is to buttress expectations and confidence, needs I think to be delivered promptly as well as muscularly,” he said.

It is now widely expected interest rates will be cut to 0.25 per cent in August alongside a possible extension of quantitative easing.

To compound matters, UK construction output fell by more than expected in May, adding to concerns the economy is in line for a sharp slowdown following the vote to exit the European Union. Output contracted 2.1 per cent compared with April and 1.9 per cent year on year, according to the Office for National Statistics.

The FTSE 100 clawed back from negative territory earlier in the day to close up 14.77 points, or 0.22 per cent, at 6,669 points.

Travel firms had led stock markets across Europe lower yesterday morning as investors reacted to the terror attack in the French city of Nice in which at least 84 people were killed.

EasyJet ended the day down 2.85 per cent at 1,140p, British Airways owner IAG slumped 0.92 per cent to 422.1p and tour operator TUI fell 1.25 per cent to 960.3p.

Thomas Cook saw a sharp 4.20 per cent drop to 63.8p while Flybe fell 3.14 per cent to 38.5p.

The CAC 40 in France closed down 0.3 per cent and the DAX 30 in Frankfurt ended the day flat.

Tony Cross, market analyst at Trustnet Direct, said: “The FTSE 100 may have finished Friday’s session at highs for the day, but the gains are limited to a dozen points or so and last night’s terror attack in France is certainly casting something of a shadow over the market.

“The week may have started on an upbeat tone with that early appointment of a new Prime Minister being seen as paving the way for finally getting the Brexit proceedings under way. However, any positivity stemming from this may end up looking rather premature as in the last few hours we’ve seen reports that Article 50 won’t be triggered until a UK-wide approach can be agreed.” Shares in transport giant FirstGroup also took a tumble, falling 2.14 per cent to 100p, after reporting a dip in revenue in the first quarter. Sales across the Aberdeenbased firm fell 1.4 per cent, largely due to poor trading in the US, where it operates Greyhound coaches. The firm also said it is too early to say what impact the Brexit vote will have on the company. Intertek and Ashtead were the day’s best performers in London’s top tier, rising 1.67 per cent and 1.77 per cent respectively, both riding higher after broker price target upgrades.

The UK weighted FTSE 250 was down 60.77 points at 16,727.

NEW YORK

THE Dow industrials ended at a record high and major indexes closed a third consecutive week of gains as upbeat economic data and the start of earnings season gave investors confidence the current rally has legs.

Consumer stocks led declines on the S&P 500 while the financial sector posted a less than 0.2 per cent drop, even as Wells Fargo, whose profits fell in the second quarter, fell 2.5 per cent to $47.71 to rank as the largest weight on the S&P.

The Dow Jones industrial average rose 10.14 points, or 0.05 per cent, to 18,516.55, the S&P 500 lost 2.01 points, or 0.09 per cent, to 2,161.74 and the Nasdaq Composite dropped 4.47 points, or 0.09 per cent, to 5,029.59.

The Dow closed at a record high and joined the S&P 500 in posting fresh intraday historic highs. The three major indexes closed their third week of gains, a period in which the S&P has advanced more than 6 per cent.

Equity futures fell late in the day after reports of a military coup under way in Turkey, while market reaction to Thursday’s attack in France was limited to declines in travel and leisure company shares.

An ETF that follows the Turkish market dropped sharply near the end of the session and was down 6.9 per cent after the bell.

Herbalife jumped 9.9 per cent to $65.25 after the weight-loss products maker agreed to pay $200 million and change the way it does business to avoid being labelled a pyramid scheme by regulators.

About 6.1 billion shares changed hands in US exchanges.