FTSE 100 close: London index retraces losses on softer pound
London’s FTSE 100 retraced losses today, shaking off investor fears over the risk of the effects of a US recession rippling throughout the global economy.
The capital’s premier index climbed 0.37 per cent to 7,628.11 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, jumped 0.54 per cent to 19,217.22 points.
The indexes reversed a poor start to the day in the City as they were dogged by a risk-off early session caused by worries about the health of the global economy amid a US downturn.
A US economic slump would hit London and European firms by weakening demand for their products and amplifying greater caution among investors, likely causing them to ditch stocks and flow into safer assets.
However a weaker pound helped the FTSE 100 turnaround its poor start. Lots of companies on the index generate a big chunk of their income from selling their products abroad. A weaker pound makes those products more competitive, raising the chances of exporters receiving an income boost.
A big proportion of Britain’s biggest companies earn revenue outside the UK, which, when exchanged into sterling, is worth more when the pound softens.
Sterling lost 0.14 per cent against the US dollar, although it is up more than two per cent on the greenback so far this year.
Cigarette maker British American Tobacco was among the best performers on the FTSE 100, adding 1.5 per cent after it said this morning it expects profits and revenues to meet forecasts.
Oil giants BP and Shell fell around half a percentage point due to oil prices losing momentum. The pair represent a big share of the premier index so movements in their share prices have a strong influence over the FTSE 100’s direction.
Oil prices dropped 0.4 per cent.
Numbers out this morning from the British Retail Consortium and Barclays revealed UK consumer spending is running far behind inflation, meaning in real terms, consumption is shrinking.
“There is mounting evidence that consumers in the UK are feeling the pain of the cost-of-living crisis more acutely and are cutting back on discretionary purchases. Scorching food and mortgage costs are burning shoppers spending power and credit card spending has slowed markedly as a result,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, said.
The Confederation of British Industry survived a crunch vote on its future by a wide margin.
Wall Street opened higher.