Pound and FTSE both rise as sentiment continues to improve
Traders felt confident after suggestions the DUP would allow changes to the Irish backstop
Better-than-expected economic news and the royal assent given to Parliament’s bill to block Brexit helped the FTSE 100 close out the week on a high, with the pound following suit.
The FTSE 100 ended the day on Friday up 22.79 points at 7,367.46, hitting a five-week high – with growth coming from UK-focused companies, as foreign-facing firms suffered.
But the pound’s rampage upwards against the dollar was the most noticeable movement in the City, as it rose to seven and 12 week highs against the dollar and euro respectively.
It’s been quite the week for the pound. Even with the prorogation of Parliament factored in, it has benefited from the Benn bill’s royal assent, better than forecast jobs and GDP data and, now, a report that the DUP are ready to ‘shift red lines’ regarding the Irish backstop Connor Campbell, Spreadex
A pound is now worth 1.2457 dollars – a rise of 1.01% on the day – and was up 0.91% against the euro at 1.1249.
The main cause for the pound to rise so dramatically was down to a report in The Times on Friday that suggested the DUP was ready to accept an amended backstop in the Irish Sea to resolve Brexit – something the political party had previously ruled out.
As the day went on, it remained unclear whether the reports would lead to a Brexit solution, but, traders were happy to take it as read, in a week of encouraging data.
Connor Campbell, financial analyst at Spreadex, explained: “It’s been quite the week for the pound. Even with the prorogation of Parliament factored in, it has benefited from the Benn bill’s royal assent, better than forecast jobs and GDP data and, now, a report that the DUP are ready to ‘shift red lines’ regarding the Irish backstop.
“And while Arlene Foster’s party have denied any such softening, that hasn’t stopped the currency climbing.”
Typically when the pound rises, the FTSE 100 falls, because shares become more “expensive” for traders who operate in US dollars.
And whilst that happened in early trading, investors continued to be buoyed by European Central Bank’s decision on Thursday to cut interest rates and unveiled a new round of quantitative easing – leading to an eventual higher closing price.
European markets also rose, with Germany’s Dax and France’s Cac closing up 0.4% and 0.2% respectively.
In company news, the battle between the London Stock Exchange Group and its Hong Kong rival heated up over the latter’s £31.6 billion takeover attempts.
The Hong Kong exchange said it would start approaching shareholders with its plans after the LSE said it sees “no merit” in holding discussions for the “fundamentally flawed” approach.
Shareholders appeared to enjoy the ratcheting up of the rhetoric, with shares closing out the day up 262p at 7,514p.
Wetherspoons continued to outperform the market with a 6.8% rise in like-for-like sales, although rising costs weighed on full-year underlying profits, which fell 4.5% to £102.5 million. Shares closed the day flat at 1,550p.
And finally, OVO’s plan to buy SSE’s energy business for £500 million helped SSE shares to rise 17.5p to 1183.5p – with the latter now hoping to focus on its power generation and energy networks business instead.
The biggest risers on the FTSE 100 were Barratt Developments up 35.2p at 659.2p; Royal Bank of Scotland up 10.9p at 208.8p; Barclays up 7.92p at 156.62p; Lloyds Banking Group up 2.69p at 54.63p and ITV up 6.15p at 126.3p.
The biggest fallers were Coca Cola HBC down 110p at 2,598p; British American Tobacco down 103p at 2,970p; Diageo down 101p at 3,280.5p; Fresnillo down 19.8p at 729.6p and Reckitt Benckiser down 149p at 6,268p.