FTSE falls as pound gets lift from weak dollar
Turmoil in the White House has tended to have a negative impact on the greenback.
Sterling rose and the FTSE 100 was left nursing heavy losses as political developments on both sides of the Atlantic played their part in markets on Tuesday.
News that Donald Trump had sacked his secretary of state Rex Tillerson, along with US inflation data, sent the dollar down sharply against the pound, leaving sterling at 1.398 US dollars, up 0.5% on the day.
Turmoil in the White House, which has increased markedly since Mr Trump came to power, has tended to have a negative impact on the greenback.
Connor Campbell, financial analyst at Spreadex, said: “Both the dollar and the Dow Jones seemed a tad shaken by the firing of Tillerson, the latest in a string of high-profile departures from the White House.”
Mr Tillerson’s dismissal comes after he spoke with Foreign Secretary Boris Johnson about the nerve gas attack in Salisbury which targeted a former Russian spy and his daughter.
Providing further momentum to the pound were figures from the Office for Budget Responsibility (OBR), which upgraded growth projections and forecast a fall in Government borrowing and national debt over the coming years.
It came alongside Philip Hammond’s Spring Statement, in which the Chancellor hinted he will turn on the spending tap following years of austerity.
Against the euro, the pound was also in positive territory, up marginally to 1.127 euro.
But sterling’s gain led to pain for the FTSE 100, which went in the opposite direction, tumbling 1.05%, or 75.98 points, to 7138.78.
“Informing the UK index’s decline was Hammond’s limp Spring Statement; the promise that real wage growth would turn positive in the first quarter of 2018-19 reignited fears of a Bank of England rate hike, dragging the FTSE lower,” Mr Campbell added.
The FTSE 250 also ended down 1.26%, or 254.30 points, at 19863.23, with Greencore by far the biggest faller.
Shares in the Irish food-to-go supplier plunged 30% to 127.25p after it warned that problems at its US division would dent profits.
The sandwich maker flagged the weak performance of “underutilised” US sites, the timing of new business contributions and the sterling/dollar exchange rate as having led to a reduced expectation in profit growth.
Shares in fashion retailer French Connection ended 24.6% up at 42p after it revealed it received an unwanted takeover approach last year as it insisted it was “very close” to returning to profit after six years in the red.
The firm said the approach came from an unnamed US suitor and led to months of talks, although no formal offer was made.
Across Europe, the French Cac 40 closed down 0.6% while the German Dax ended the day 1.6% in the red.
The price of Brent crude nudged down 0.45% to 64.66 US dollars a barrel.
The biggest risers on the FTSE 100 were Antofagasta up 26.8p to 914.6p, Glencore up 7.65p to 376.7p, GKN up 5.9p to 430p, EasyJet up 22p to 1,629.5p and Ferguson up 56p to 5,308p.
The biggest fallers on the FTSE 100 were BT Group down 7.85p to 2.27.15p, St James’s down 37p to 1,113p, WPP down 36p to 1,159p, Johnson Matthey down 93p to 3,157p and 3i Group down 25p to 898p.