Mark Carney speech sends pound lower, boosting FTSE 100
The Bank of England Governor warned of the effects that Brexit could have on inflation.
London’s blue chip index recovered some of the losses it suffered last week, supported in part by a weaker pound that fell further after a speech from Bank of England boss Mark Carney.
The FTSE 100 ended the day up 0.5% or 37.81 points at 7,253.28.
It was helped by a pull back in the pound, as many of its multinational components tend to benefit when foreign currencies are stronger.
Sterling was last week trading at its highest level since the Brexit vote result amid signs that the Bank of England could raise interest rates within the coming months.
That excitement was starting to wane in morning trading, but the pound took a further hit after Bank of England Governor Mark Carney used a speech in Washington to warn of the effects that Brexit could have on inflation.
The pound was down 0.8% versus the greenback at 1.348, and down 0.6% against the euro at 1.130.
But David Madden, a market analyst at CMC Markets UK, said the pound was still holding out some strength, despite its decline.
“The GBP/USD is down on the day as dealers book their profits from last week’s major rally. On Friday, the pound hit its highest level versus the US dollar since the UK’s EU referendum. The upward trend is still intact despite the pullback today.”
But given Mr Carney’s speech, Mr Madden said “volatility is likely to be high”.
Across Europe, the French Cac 40 and German Dax ended the day up around 0.3% each.
Brent crude prices dropped more than 0.3% to around $55.27 per barrel as markets continued to recover in the wake of major hurricanes in the United States.
In UK stocks, BAE Systems was one of the biggest risers on the FTSE 100, climbing 23.5p to 619.5p, amid news that Qatar’s defence minister is planning to buy 24 Typhoon jets from the British defence group.
Away from the top tier, esure shares surged 15.9p to 278.5p following reports that the firm’s biggest stakeholder, Sir Peter Wood, has been in talks with would-be buyers in a move that could trigger a full-blown sale of the business.
Sir Peter owns a 30.7% position in the company.
Dairy Crest rose 14.5p to 624p as the cheese and butter maker said it was on track for double-digit volume growth for the six months ending in September, thanks to a strong customer appetite for the “UK’s leading cheese brand”.
Shares in insurer Hiscox fell 9p to 1,242p after the FTSE 250 firm said the impact of Hurricane Harvey on the US would cost it $150 million (£110 million) in claims.
Petra Diamonds shares tumbled 4.75p to 79.25p after profits at the precious metals miner slumped by more than a third as mounting costs, an unfavourable currency translation and expansion delays weighed on performance.
The biggest risers on the FTSE 100 were BAE Systems up 23.5p to 619.5p, Johnson Matthey up 75p to 2,910p, GKN up 8.8p to 347.6p, Mondi up 48p to 2,058p.
The biggest fallers on the FTSE 100 were Imperial Brands down 61.5p to 3,266p, Randgold Resources down 130p to 7,415p, Mediclinic International down 11.5p to 695.5p, and Shire down 59.5p to 3,859.5p.