Stronger sterling pushes London market into the red
The FTSE 100 Index closed down 17.22 points to 7,487.81, as sterling chalked up gains against the US dollar and the euro.
London’s premier index eased into the red on Monday as the pound strengthened on expectations that interest rates will rise on Thursday.
The FTSE 100 Index closed down 17.22 points to 7,487.81, as sterling chalked up gains against the US dollar and the euro, with currency traders pencilling in the Bank of England to hike rates from record lows of 0.25%.
Sterling was up 0.6% against the greenback at 1.32 and 0.3% higher versus the euro at 1.135, with the Bank’s Monetary Policy Committee (MPC) stating in September that “some withdrawal of monetary stimulus was likely to be appropriate over the coming months”.
The pound was also given a boost as the greenback weakened on the prospect of US President Donald Trump opting for a dove – investment banker Jerome Powell – as the next chairman of the US Federal Reserve.
Evening Market Comment: Sterling continues to climb as investors eye Thursday’s BoE meeting... https://t.co/nf46sIRowp— Connor Campbell (@ConnorSpreadex) October 30, 2017
Multinational stocks, which trade in euros and US dollars, take a hit on the London market when sterling delivers a strong performance, as their earnings suffer from a less favourable currency translation.
Connor Campbell, financial analyst at Spreadex, said: “Though an interest rate rise on Thursday is far from certain, today’s trading seems to suggest investors think we might be in for the first hike in a decade.
“This growth helped keep the FTSE in the red, though the index did manage to halve its lunchtime losses to just 10 or so points.”
Across Europe, Germany’s Dax was 0.1% higher and the Cac 40 in France was marginally lower.
On the oil markets, the price of Brent crude slipped 0.4% to 60.32 US dollars a barrel, as traders squared rising Iraqi oil exports against the prospect of Opec extending its production cuts past March.
In UK stocks, budget airline easyJet rose just shy of 2%, or 25p, to 1,298p, after the discount airline clinched a deal over the weekend to buy up part of Air Berlin’s operations for 40 million euros (£35 million).
The deal will see easyJet lease up to 25 A320 aircraft and take over other assets from the failed German airline, including landing slots at Berlin Tegel Airport.
The move extends its footprint in Berlin where it has a base at the smaller Schonefeld airport.
Neil Wilson, a senior market analyst at ETX Capital, said: “Opportunistic growth is not without risks but this looks a smart move for the company as it builds out its presence in Berlin and Germany.
“With Monarch also being carved up, there will be more scraps to fight over for the stronger carriers to cement their position.”
Banking giant HSBC closed down 1.5%, or 1.3p, to 737p, despite reporting a near five-fold rise in third quarter profits.
The lender said pre-tax profits rose to $4.6 billion (£3.5 billion) in the three months to September 30, marking a 448% jump compared to $843 million (£642 million) during the same period last year.
Reported revenue for the quarter came in at $12.98 billion (£9.9 billion), marking a slight slowdown from $13.17 billion (£10 billion) in the previous quarter, but a 36% rise from $9.51 billion (£7.2 billion) a year earlier.
HSBC said it experienced growth across three of its main businesses, with revenue increasing across its retail banking and wealth management operations, commercial banking, as well as its global banking and markets division.
The biggest risers on the FTSE 100 Index were Fresnillo up 35p to 1,337p, Shire up 95p to 3,694.5p, Kingfisher up 6.3p to 316.6p, easyJet up 25p to 1,298p.
The biggest fallers were British American Tobacco down 105p to 4,917p, Mondi down 37p to 1,829p, Johnson Matthey down 67p to 3,323p, and Tesco down 3.6p to 181.9p.