The pound hit a fresh post-Brexit high on Wednesday, as the UK currency dined off the weakening US dollar and employment data pointing to a record number of people in work.
Sterling reached a 19-month high of 1.424 against the greenback during the session, before paring gains to rise 1.5% to 1.420 at the time of the London market close.
The pound was also 0.7% higher versus the euro at 1.145 after official data showed just over 32.2 million people in employment for the three months to November – the biggest total since records began in 1971.
However, the FTSE 100 Index fell 88.40 points to finish at 7,643.43, as the pound’s strong performance weighed on blue-chip stocks.
A rise in sterling’s value can cause investors to pull out of multi-national stocks because their overseas earnings suffer from a less favourable currency translation.
On the dollar’s weakness, David Madden, chief market analyst at CMC Markets, said: “The US dollar is taking a pounding, and the dollar bears are piggy backing on comments from Steven Mnuchin, the US Treasury Secretary, who stated the weak currency is good for US trade.
London Stock Exchange update: #FTSE 100 closes at 7,643.43, down 1.14%— London Stock Exchange (@LSEplc) January 24, 2018
“The statement gave the impression Mr Mnuchin wouldn’t stand in the way of a declining US dollar.”
Across Europe, Germany’s Dax sunk 1.1% and the Cac 40 in France dropped 0.7%.
The price of oil ended the day in the red, giving up gains in the previous session when Opec production cuts and a stronger outlook for the global economy spurred growth.
Brent crude was marginally lower at 69.78 US dollars a barrel.
In UK stocks, shares in the London Stock Exchange surged 5% after reports fuelled speculation that the group was in line for a £15 billion takeover bid.
Sir Christopher Hohn, co-founder of the Children’s Investment Fund Foundation, told investors that US rivals the CME Group and the Intercontinental Exchange (ICE) may launch a shock swoop for the LSE, according to sources in a Sky News report.
It comes after Sir Christopher led a failed attempt to oust LSE chairman Donald Brydon and keep chief executive Xavier Rolet in position until 2021. Shares closed up 189p to 3,988p.
In contrasting fortunes, Sage Group emerged as the biggest faller on the top flight after investors fretted over weaker than expected first quarter sales.
The business software firm was off 53.2p to 768.2p after reporting 6.3% rise in organic revenues for the three months to December 3.
The group has been held back by its French division, which “continues to significantly underperform relative to the rest of the group”.
Away from the top tier, Fever-Tree suffered a choppy day’s trading after a fizzing morning rally went flat by the closing bell.
The premium mixer maker announced on Wednesday that it had seized the UK market’s top spot and backed annual earnings to outstrip forecasts.
It said total full-year sales were expected to soar 66% to £169 million, underpinned by a rousing performance on home soil.
However, investors took a cautious view of the company’s performance by market close, with shares down more than 1%, or 38p to 2,397p.
The biggest risers on the FTSE 100 Index were London Stock Exchange Group up 189p to 3,988p, Fresnillo up 49.5p to 1,384.5p, Randgold Resources up 214p to 7,262p, ITV up 3.9p to 168p.
The biggest fallers were Sage Group down 53.2p to 768.2p, Ashtead Group down 66p to 2,086p, BAE Systems down 17.8p to 565.2p, Rentokil down 8p to 295.7p.