FTSE 100 dragged lower by stronger pound – Nokturnal

At the close yesterday, The FTSE 100 seemed to be heading for a positive finish to the week after US CPI inflation sparked a global rally in stocks.

However, in Friday’s midday trade, the FTSE 100 looked set for another negative week as US interest rate fears reemerged and a stronger pound sapped the life out of London’s overseas earners.

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News the UK grew faster than expected in the second quarter helped lift the pound against the dollar and the inverse relationship between the FTSE 100 and sterling kicked in.

Although broad European equity indices were mostly in the red, the FTSE 100 was underperforming, with losses in excess of 1% at the time of writing. The German Dax was 0.4% weaker.

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“After another positive surprise on US inflation, stocks were all set to stage another rally before the head of the San Francisco Federal Reserve Bank intervened to dampen hopes of a shift in the trajectory of rates,” said AJ Bell investment director Russ Mould.

“That dragged US stocks down from their highs and set the scene for a weak open for European stocks.

“The FTSE 100 was also affected by a strong pound, after better-than expected figures on the UK economy, and weak resources stocks after a tough week for China marked by deflation, falling producer prices and soft trade figures as well as a sorry showing for Chinese equities. As the world’s most rapacious consumer of commodities, the fortunes of the Chinese economy are closely tied to these markets.”

FTSE 100 movers

As of 12.32pm on Friday, 84 of the 100 FTSE 100 constituents were trading negatively. There was little in the way of corporate news on Friday, and moves were driven by investor positioning and macroeconomic developments.

Silver miner Fresnillo was the FTSE 100 top riser gaining 1% after trading ex-dividend yesterday.

As alluded to by Russ Mould, China-focused stocks, including the miners, were among the top fallers. Copper miner Antofagasta gave up 2% while Glencore fell 1.8%.

Uk housebuilders were weaker despite the better than expected UK GDP release, as stronger growth means the Bank of England is more likely to continue hiking rates to bring inflation under control. UK CPI inflation stands at 7.9%, significantly higher than the 3.2% US CPI released yesterday.

Entain was the top faller after announcing it was getting aside £585m for an investigation into its Turkish business yesterday.