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Pound rebounds but FTSE 100 Index falls after Brexit ruling

Published 03/11/2016

The FTSE 100 Index closed down 54.91 points at 6,790.51
The FTSE 100 Index closed down 54.91 points at 6,790.51

The pound embarked on a remarkable rally after a lightning bolt ruling from the High Court cast doubt over Brexit.

Sterling surged to a three-and-a-half week high against the US dollar, as three senior judges ruled that Prime Minister Theresa May cannot trigger Article 50 of the Lisbon Treaty without facing a parliamentary vote.

The rebound from the pound dealt a blow to the FTSE 100 Index, which slumped back from morning gains to close down 54.91 points at 6,790.51.

However, some stocks were enjoying uplift from sterling's rise, with easyJet and British Airways-owner IAG climbing 29.5p to 997.5p and 9.4p to 450.8p respectively.

Airlines have seen their earnings come under pressure from the Brexit-hit pound, with IAG reporting last week that the slump in sterling had dealt a 162 million euro (£145 million) blow to operating profit in the three months to the end of September.

Jasper Lawler, market analyst at CMC Markets, said the markets were reacting with caution to the fresh bout of uncertainty served up by the High Court.

"Investors are not panicking but have been paralysed into inaction over the endless possible outcomes of the US election and Brexit."

"The Government will appeal the (High Court's) decision so it's not game over yet," he added.

"Were the Government to be overruled in its appeal, there is a real prospect that Brexit can be overturned.

"Still, assuming the majority of MPs would be willing to vote against their constituency might be overly generous."

Across Europe, Germany's Dax was down 0.4%, while the Cac 40 in France was flat.

The price of oil was 0.9% lower at 46.45 US dollars a barrel as Opec's plans to curb production became cloaked in scepticism ahead of the organisation's meeting in Vienna on November 30.

On the currency markets, the pound surged to 1.249 versus the dollar, before paring gains to trade up 1.2% at 1.245.

Sterling also climbed 1.2% against the euro to 1.122, despite the Government's immediate announcement that it would appeal against the High Court's decision at the Supreme Court.

The landmark High Court ruling was part of a triple tonic for sterling, which was buoyed by better-than-expected data from the services sector and the Bank of England's decision to keep interest rates on hold at 0.25%.

In UK stocks, supermarket chain Morrisons was pushed higher after it totted up a full year of sales growth, with its "biggest ever" Halloween helping cement its turnaround.

The grocery giant said like-for-like sales in the third quarter rose 1.6%, with Halloween turnover up around 20%. Shares rose 2.1p to 223.4p.

Away from the top tier, Tate & Lyle was among the biggest risers on the FTSE 250 after the food ingredients maker enjoyed a sterling sweetener after the Brexit-hit pound boosted profits by £15 million.

Shares were up more than 3%, or 28.5p to 807p, after the firm said pre-tax profits leapt 83% to £128 million in the six months to the end of September, while sales rose 13% to £1.321 billion over the period.

The biggest risers on the FTSE 100 Index were Royal Bank of Scotland up 11.2p to 193.9p, Dixons Carphone up 15.1p to 341.5p, British Land Company up 22p to 607p, Marks & Spencer up 10.9p to 351.2p.

The biggest fallers on the FTSE 100 Index were Randgold Resources down 475p to 7,110p, Fresnillo down 77p to 1,703p, Glaxosmithkline down 52.5p to 1,554p, Johnson Matthey down 104p to 3,265p.

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