September 15, 2017 / 8:58 AM / 3 months ago

Surging sterling sends FTSE to fresh four-month low

LONDON (Reuters) - The UK’s top share index closed at a four-month low on Friday, as a surging pound hit its largely dollar-earning constituents, with financials shares taking strong losses and only a handful of stocks ending the day in positive territory.

A sign displays the crest and name of the London Stock Exchange in London, Britain August 15, 2017. REUTERS/Neil Hall

Britain's blue chip FTSE 100 .FTSE index ended the day down 1.1 percent, posting a second weekly loss in a row and closing at 7,215.47 points, a level last seen early in May.

The FTSE 100 has struggled as sterling jumped after the Bank of England signalled on Thursday that it was likely to raise interest rates in the coming months.

On Friday, sterling hit its highest level against the U.S. dollar since the Brexit vote as Gertjan Vlieghe, a Bank of England policymaker who had been its strongest advocate of ultra-low borrowing costs, said rates might need to rise in the coming months.

The rise in the pound put pressure on Britain’s dollar-earning firms, which have enjoyed an accounting boost as their revenues were converted back to the British currency following its plunge after the Brexit vote last year.

The FTSE 100 ended 2016 with a gain of more than 14 percent, but hasn’t fared as well in 2017, up just about 1 percent so far this year.

“It’s looking a bit ominous for the FTSE,” said Jasper Lawler, head of research at London Capital Group.

“Given the velocity in the move in the pound, the FTSE can only really go one way and that’s down,” Lawler added.

Financials took the most points off the index, with HSBC (HSBA.L), Lloyds (LLOY.L), Barclays (BARC.L), Prudential (PRU.L) and Standard Chartered down between 1.3 percent and 2.3 percent.

Miners and energy stocks also came under pressure after the price of copper edged lower and oil prices slid. Miners Glencore (GLEN.L), Rio Tinto (RIO.L) and BHP Billiton (BLT.L) fell between 1.4 percent and 2.3 percent, while heavy weight oil majors BP (BP.L) and Royal Dutch Shell (RDSa.L) lost 0.8 percent and 1.9 percent respectively.

Cruise operator Carnival (CCL.L) was the biggest faller, dropping 6.2 percent following a downgrade from Credit Suisse to “neutral”.

The broker cited an uncertain outlook for Carnival due to the impact of Hurricane Irma on the key Caribbean cruise market as well as further threats to demand in the Mediterranean and China.

Outside of the blue chips, pub group JD Wetherspoon (JDW.L) jumped 13.9 percent to a record high after reporting a near-28 percent jump in profit.

JD Wetherspoon’s shares have shrugged off any hit from a Brexit-induced slowdown, gaining around 29 percent so far this year and outperforming its peers.

“The results show continued benefit from price increases and consolidating its loyal customer base into fewer sites by disposing of secondary/tertiary locations – the impact of which will fade into 2018,” analysts at Liberum said in a note.

Reporting by Kit Rees and Julien Ponthus; Editing by Keith Weir

Our Standards:The Thomson Reuters Trust Principles.
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