Sterling surged to fresh highs on Wednesday as currency traders continue to be boosted by the belief that Britain’s departure from the European Union will be delayed.
The pound rose 0.4% versus the US dollar to hit 1.330, a seven-month high. Against the euro, sterling touched 21-month highs and was trading up 0.5% at 1.169 at the London market close.
The currency has been buoyed by a dramatic U-turn by Theresa May, who announced she will allow MPs to vote on an extension to the two-year negotiation period set down in the EU’s Article 50 – if she has not secured Parliament’s approval for her deal by March 12.
However, David Cheetham, chief market analyst at XTB, cautioned: “There’s little by the way of fresh developments to support this rise with the markets seemingly building on recent gains as traders bet that a no-deal Brexit will be averted.”
Sterling’s strength weighed on the FTSE 100, however, with the benchmark index shedding 43.92 points, or 0.61%, to close at 7,107.2.
It was also dragged down by geopolitical concerns ranging from “China vs USA, Trump vs Kim Jong-un, Michael Cohen vs Trump, India vs Pakistan, UK vs EU, Tories vs Tories, Labour vs Labour”, said SpreadEx’s Connor Campbell.
Stuck at the bottom of the index was Marks & Spencer, which finally came clean about the creation of a joint venture with Ocado in a move which the companies say will transform online grocery shopping.
M&S is set to acquire 50% of Ocado’s UK retail business for up to £750 million as part of the deal.
The JV will trade as Ocado.com but will stock M&S-branded products, and benefit from access to the retailer’s database of 12 million M&S food shoppers.
But M&S shares sank on the news that the struggling retailer will issue new shares in a bid to raise up to £600 million to finance the deal, as well as slash the dividend by 40%.
The stock closed down 37.8p, or 12.5%, at 265.4p.
Ocado shares, on the other hand, surged, closing the day 29p higher at 1,019p.
Also riding high was Taylor Wimpey, with the housebuilder getting 2019 off to a “very positive” start despite Brexit uncertainty as it notched up a rise in full-year profits.
The group posted a 5.5% increase in underlying pre-tax profits to £856.8 million for 2018.
Taylor said it had continued to see strong home-buyer demand in spite of increasing signs that Brexit worries are weighing on Britain’s property market.
Shares closed up 6.05p at 177p.
On the FTSE 250, Ted Baker shares were pummelled after the troubled fashion retailer warned profits will fall short of market expectations this year due to adverse foreign exchange movements and additional costs.
The company said pre-tax profits for the financial year ended January 26, 2019 are now expected to be £63 million, compared with consensus estimates of £73.8 million.
Shares closed down 180p at 1,820p.
In Europe, Germany’s DAX shed 0.5% while France’s CAC was down 0.4%.
A barrel of Brent crude was changing hands at 66 US dollars per barrel (£49.55), a rise of 1.5%.
The biggest risers on the FTSE 100 were Taylor Wimpey up 6.05p at 177p, Ocado up 29p at 1,019p, Persimmon up 56p at 2,452p and Barratt Developments up 10p at 599.2p.
The biggest fallers on the FTSE 100 were Marks & Spencer down 37.8p at 265.4p, NMC Health down 118p at 2,618p, Hiscox down 62p at 1,572p and St James’s Place down 35.6p at 941.2p.