Friday 20 July 2018

London market rebounds as US dollar narrows losses

The FTSE 100 Index closed up 49.70 points at 7,665.54.

There was a better-than-expected performance from the UK economy (David Davies/PA)
There was a better-than-expected performance from the UK economy (David Davies/PA)

By Ben Woods, Press Association Chief City Correspondent

London’s top-flight index rebounded on Friday as a stronger US dollar took the edge off sterling’s rally and encouraged investors to snap up multinational stocks.

The FTSE 100 Index closed up 49.70 points at 7,665.54, with the American dollar finding some support after US President Donald Trump indicated his preference for a strong US currency.

US Treasury Secretary Steven Mnuchin also pulled back on comments suggesting he was in favour of a weaker US dollar that would boost overseas trade.

A fall in the pound and a stronger US dollar can spur investors towards buying multinational stocks on the London market because their overseas earnings benefit from a more favourable currency translation.

Despite finding some respite, pressure remained on the greenback, with the pound’s rally easing to a rise of 0.3% at 1.417. Sterling was 0.1% higher versus the euro at 1.141.

Connor Campbell, financial analyst at Spreadex, said the US dollar saw losses ease despite “far worse than forecast” US economic data.

He said: “Though the fourth quarter figure came in at 2.6% at the annualised rate, lower than both the 3.2% seen in Q3 and the 3% expected by analysts, the country’s underlying strength, namely in consumer spending and fixed investment, meant that the dollar didn’t take another dive lower following the release.”

A better-than-expected performance from the UK economy was helping to boost the pound, with gross domestic product (GDP) growing by 0.5%, according to the Office for National Statistics’ (ONS) initial estimate for the fourth quarter.

The biggest impact came from the UK’s services sector, which grew 0.6% quarter on quarter, largely driven by business and financial services from the likes of lawyers, architects and business administrators.

However, the ONS said longer-term trends were pointing to a broader slowdown.

Across Europe, the Cac 40 in France was 0.9% higher and Germany’s Dax was up by 0.3%.

Brent crude was comfortably above $70 a barrel, as US dollar weakness supported prices. The price of oil was up 0.7% to $70.52 a barrel at the time of the London market close.

In UK stocks, investors cheered GlaxoSmithKline after the drugs giant was handed a “positive opinion” from European regulators over its shingles and post-herpetic neuralgia drug Shingrix.

Shares climbed more than 1%, or 20p, to 1,355p.

HICL Infrastructure Company took a tumble after it flagged a string of loan agreement defaults linked to Carillion’s collapse.

The group was down 4% in afternoon trading on the London Stock Exchange, as it moved to appease lenders by parachuting in new operators for 10 contracts where Carillion was the facilities manager.

Shares dropped 6.4p to 141.1p, as HICL said the process would take several months to complete, but lenders were being “supportive of the actions under way”.

The biggest risers on the FTSE 100 Index were Next up 154p to 5,218p, Ashtead Group up 52p to 2,124p, Bunzl up 50p to 2,059p, BAE Systems up 13.6p to 579.4p.

The biggest fallers were Mediclinic International down 18.2p to 611p, Reckitt Benckiser down 101p to 6,727p, Randgold Resources down 68p to 7,130p, Antofagasta down 7p to 941p.

Press Association

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