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Sterling recovery as Brexit effect eclipsed by construction boost and Trump win

Published 11/11/2016

The FTSE 100 Index was trading lower by about 1.23% or 83 points at 6744 on Friday morning
The FTSE 100 Index was trading lower by about 1.23% or 83 points at 6744 on Friday morning

The pound hit its highest level since the October "flash crash" as better-than-expected construction figures and concerns over Donald Trump's presidency put Brexit fears on the back-burner.

Sterling was trading 0.4% higher at 1.260 against the US dollar, after touching 1.266 earlier in the trading day.

It marked the currency's highest level since October 6, when it unexpectedly plunged to 1.18 versus the greenback overnight due a suspected "rogue algorithm".

Against the euro, sterling was 0.8% higher at 1.161.

The stronger pound added fuel to an FTSE 100 sell-off , as many of the listed multinationals tend to benefit from earnings in stronger foreign currencies.

The blue chip index closed lower by 1.4% or 97.55 points at 6730.43.

The British currency climbed higher following news the output in Britain's construction industry bucked expectations of a September slowdown thanks to a jump in infrastructure work.

The Office for National Statistics (ONS) said construction activity grew 0.3% in September compared to economist estimates for a 0.4% drop.

However, the bulk of sterling's gains has been chalked up to Mr Trump's presidential victory.

Jasper Lawler, a market analyst at CMC Markets UK, said: "The British pound as a top FX gainer this week bucks the trend of Brexit-induced weakness seen over the past few months.

"There's an element of simply a shift in focus behind this. The phenomenon of Donald Trump as US President-elect has put Brexit on the back-burner, allowing the pound to creep higher."

In Europe, the French Cac 40 closed lower by 0.9%, while the German Dax rose by nearly 0.4%.

Meanwhile , Brent crude prices slumped 2.6% to 44.48 US dollars (£35.29) per barrel after Opec said output rose to record levels in October at 33.64 million barrels per day.

In UK stocks, Barclays rose 0.3% or 0.65p to 201.75p after the bank completed the sale of its £1.2 billion Spanish and Portuguese credit card business to Spanish online bank WiZink.

Barclays has been working to sell down and dispose of its hinterland business as quickly as possible in order to focus on core US and UK operations.

Away from the top tier index, FTSE 250 building materials firm SIG closed lower by 21.9% or 25.3p to 90.5p after news that chief executive Stuart Mitchell would be stepping down.

The announcement came as the company warned over profits following increased competition and a slowdown in activity in the wake of the Brexit vote.

The biggest gainers on the FTSE 100 were BT Group up 13.15p to 361p, Marks and Spencer Group up 10.4p at 327.2p, Next up 149p at 5,040p, and Severn Trent up 47p at 2,177p.

The biggeset losers on the FTSE 100 were Fresnillo down 141p at 1,435p, Randgold Resources down 430p at 5,955p, Standard Chartered down 41.80p at 617.2p, and Smiths Group down 72p at 1,374p.

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