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Pound soars after PM hints at future fiscal stimulus

Published 21/11/2016

The blue chip index was trading lower by 0.2 per cent in early morning trading
The blue chip index was trading lower by 0.2 per cent in early morning trading

The pound surged on Monday after Prime Minister Theresa May hinted at future fiscal stimulus and assured businesses that she was working to avoid a sudden "cliff edge" change after Brexit.

The pound was trading higher by 1.13% at 1.248 US dollars after briefly breaking above 1.25, and was 0.86% against the euro at 1.176.

The FTSE 100 closed relatively flat, up 2.19 points at 6777.96 points, as rising commodity prices buoyed mining and energy stocks.

Sterling rose after Mrs May acknowledged Brexit fears, but said businesses would benefit from global trade opportunities after leaving the bloc.

Speaking at the Confederation of British Industry (CBI) conference in central London, Mrs May said: "I understand the point ... that people don't want a cliff-edge; they want to know with some certainty how things are going to go forward."

She added: "That will be part of the work that we do in terms of the negotiation that we are undertaking with the European Union."

CMC Markets analyst Jasper Lawler noted that Mrs May also showed support for monetary policy and hinted that the Government would embark on its own fiscal stimulus, by saying it "will build on the Bank of England's actions to aid the economy".

Across Europe, the French Cac 40 and German Dax closed higher, up 0.56% and 0.19%, respectively.

Energy stocks shot to the top of the FTSE 100 as oil prices jumped on hopes that Opec was one step closer to reaching a deal that would cap output to support prices when the cartel meets in Vienna on November 30.

Royal Dutch Shell's B shares rose 30.5p to 2,100p, and BP jumped 8.6p to 456.25p, as Brent crude prices soared 4% to 48.67 US dollars per barrel (£39.05).

Russian President Vladimir Putin said on Sunday that his country was prepared to freeze output and that there was a high probability that an agreement would be reached with Opec.

Rising copper prices pushed mining stocks to the top of the blue chip index, with shares including Randgold Resources rising 215p to 6,005p, Fresnillo up 41p to 1,330p, and Anglo American rising 33p to 1,122.5p.

Diageo fell 24p to 2,005p on news that the drinks giant will be hit by strikes in the run up to Christmas after workers voted for industrial action over cuts to their pensions.

ITV was the worst performer on the FTSE 100, down 4.4p to 165.6p, after going ex-dividend - which means new buyers no longer qualified for the latest dividend payment.

Away from the top tier, Mitie shares plunged 20p to 190p after the company swung to a £100.4 million half-year loss and again issued a profit warning as increased economic uncertainty and higher staff costs hit the balance sheet.

Shares in womenswear retailer Bonmarche rose 3.4p to 90.5p despite reporting an 8.6% slump in like-for-like sales in the 26 weeks to September 24, resulting in revenues falling 4% to £93.1 million.

Bonmarche said that unseasonable weather as well as a clearance sale at BHS affected its performance, particularly in April and May.

The biggest risers on the FTSE 100 were Randgold Resources rising 215p to 6,005p, Fresnillo up 41p to 1,330p, Anglo American up 33p to 1,122.5p, and Polymetal International up 19.5p to 782p.

The biggest losers on the FTSE 100 were ITV 4.4p to 165.6p, Whitbread down 93p to 3,511p, Direct Line Insurance Group down 8.8p to 346.5p, and Centrica down 4.4p to 195.2p.

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