Rate talk sees pound up and FTSE tumble

Market report Emma Newlands

London’s premier index eased into the red as the pound strengthened on expectations that interest rates will rise later this week.

The FTSE 100 Index closed down 17.22 points to 7,487.81, as sterling chalked up gains against the US dollar and the euro, with currency traders pencilling in the Bank of England to increase rates from record lows of 0.25 per cent.

Sterling was up 0.6 per cent against the greenback at $1.32 and 0.3 per cent higher versus the euro at €1.135. The pound was also given a boost as the dollar weakened on the prospect of US president Donald Trump opting for a dove – investment banker Jerome Powell – as the next chairman of the US Federal Reserve.

Connor Campbell, financial analyst at Spreadex, said while imminent interest rate rise “is far from certain, today’s trading seems to suggest investors think we might be in for the first hike in a decade”.

In UK stocks, budget airline Easyjet rose 25p to 1,298p, after clinching a deal to buy up part of Air Berlin’s operations for the equivalent of £35 million. The deal will see the budget carrier lease up to 25 A320 aircraft and take over other assets from the failed German airline.

Banking giant HSBC closed down 1.3p to 737p, despite reporting a near five-fold rise in thirdquarter profits.

The biggest risers on the FTSE 100 Index included Fresnillo, up 35p to 1,337p, Shire, up 95p to 3,694.5p, and Kingfisher, up 6.3p to 316.6p. The biggest fallers included British American Tobacco, down 105p to 4,917p, Mondi, down 37p to 1,829p, and Tesco, down 3.6p to 181.9p. The Uk-based biopharmaceutical firm focused on rare and specialty diseases reached an agreement with Astrazeneca for an exclusive licence. The energy firm fell, having revealed that nonexecutive director Yves Mordacq stepped down from the board with immediate effect.