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Minor recovery for sterling as Carney warns of 'mistaken' reaction to Brexit

Published 25/10/2016

The FTSE 100 edged back above the 7000-point mark, rising 0.5% to around 7018 points
The FTSE 100 edged back above the 7000-point mark, rising 0.5% to around 7018 points

Sterling has staged a minor recovery after Bank of England governor Mark Carney suggested market reactions to Brexit may be "mistaken".

Sterling was trading lower by 0.46% at around 1.216 against the US dollar after Mr Carney appeared in front of the House of Lords Economic Affairs Committee. It marked a slight recovery after the pound dropped as much as 1% to 1.20 against the greenback earlier in the afternoon.

Against the euro, sterling was down 0.7% at 1.116.

The FTSE 100 closed higher by 0.45% or 31.24 points at 7017.6, supported by a a rise in commodity stocks linked to a positive trading update by Anglo American.

The pound bounced after Mr Carney said the market may misinterpret Britain's economic prospects as it disentangles itself from the EU.

He said that the slide in the pound over the past few weeks has largely been driven by "market perception of fundamental factors" and "what the potential relationship will be between the UK and Europe".

Mr Carney said: "The initial market perception of where the supply potential of this economy will be in the immediate aftermath (of Brexit), that perception may well be mistaken."

Across Europe, the French Cac 40 and the German Dax closed lower, down around 0.26% and 0.04% respectively.

In oil markets, Brent crude fell 1.2% to 50.80 US dollars per barrel amid uncertainty over which producers would be included in Opec's tentative supply freeze. Iraq was reportedly seeking an exemption from the deal.

On the FTSE 100, resource-linked shares rallied after Anglo American maintained its output guidance and reported better market conditions for its diamond unit.

Anglo American topped the index, rising 48.5p to 1114p. It pushed other commodity stocks higher, including Rio Tinto which rose 120.5p to 2796p, Glencore which jumped 8.55p to 146.15p, and Randgold Resources which rose 215p to 7200p.

Whitbread was the worst performing stock on the blue chip index, falling 144p to 3699p despite despite reporting a 3.4% rise in pre-tax profit to £263.6 million in the first half of the year, while revenue grew 8.1% to £1.56 billion.

However, Whitbread said that it will closely monitor the risk of a "wider macro-economic effect as a result of the UK leaving the EU, including foreign exchange and interest rate fluctuations".

GKN also clocked losses, dropping 9.3p to 313.9p after the engineering group warned that growth rates would ease in its major markets due to slightly tougher economic conditions.

Intu shares fell 5p to 286.2p as the shopping centre owner shrugged off the closure of BHS stores and cheered the strength of Britain's commercial property sector after securing a higher price for its Bromley site after the Brexit vote.

Travel stocks were little moved by the Government's backing for a third runway at Heathrow Airport. TUI shares closed 16p lower at 1029p, while International Consolidated Airlines Group (IAG) dropped 3p to 401.8p, and EasyJet fell 6.5p to 925p.

The biggest winners on the FTSE 100 were Anglo American up 48.5p to 1114p, Rio Tinto up 120.5p to 2796p, Glencore up 8.55p to 146.15p, and Randgold Resources up 215p to 7200p.

The biggest losers were Whitbread down 144p to 3699p, Travis Perkins down 46p at 1346p, GKN down 9.3p to 313.9p, and Pearson down 15p at 746.5p.

Press Association

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