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London close: Pound surges to post-Brexit high and wallop FTSE stocks

By Oliver Haill

Date: Wednesday 24 Jan 2018

London close: Pound surges to post-Brexit high and wallop FTSE stocks

(ShareCast News) - London blue chip stocks fell to their worse finish since Christmas on Wednesday as the pound surged to a post-Brexit high against the dollar after solid UK employment data.
The FTSE 100 lost 88 points or 1.14% to finish at 7,643.43, as the pound jumped 1.4% against the dollar to 1.4204, the biggest daily rise in more than nine months to regain levels not seen since before the Brexit vote. The pound was also much firmer versus the euro, up 0.7% to 1.1464.

The pound was already enjoying a strong performance amid hopes of a 'soft' Brexit but took another leg higher mid-morning, as data showed UK employment hit a record high in November. According to the Office for National Statistics, total employment increased by 102,000 in the quarter to November to 32.2m, taking the employment rate to 75.3%.

Meanwhile, the unemployment rate held steady at 4.3%, its lowest level since 1975, while average wage growth for the three-month period to November strengthened to 2.4%, up from 2.3% the month before but still well below the rate of inflation, meaning that in real terms, pay is still negative.

Although the employment data sparked a spike higher in sterling, its strength was also partly down to weakness in the greenback, which was hit by comments from US Treasury Secretary Mnuchin, who said at a press conference in Davos that a weaker dollar is good for the country's economy "as it relates to trade and opportunities".

Neil Wilson, senior market analyst at ETX Capital, said it was the dollar driving sterling records, with Mnuchin having "done a first class job of whacking the dollar".

"The strong dollar doctrine is one that markets are used to and to a degree we are entering relatively uncharted waters when the US government is not at least paying lip service to that," he added. "This should not come as a huge surprise - Trump had already made it pretty clear he didn't like the strong dollar - saying over the last year that it is 'too strong' and that 'lots of bad things happen with a strong dollar'. He should be careful what he wishes for."

In corporate news, dollar-dependent companies, led by Ashtead and BAE Systems, which have made hay from the pound's post-referendum slump as a weaker pound boosts earnings derived from overseas, saw their chickens come home to roost as the greenback took a bruising.

Accounting software developer Sage slumped even more after it increased sales slightly below target in the first three months of its financial year as it invested "heavily" in sales training to allow sales to accelerate in coming months.

"Investors have little to carp about, given the strong growth in its North America unit, so today's weakness is down to that old favourite, 'profit taking'," said Chris Beauchamp at IG. "The firm's business is never going to inspire the kind of excitement you get in tech firms like Ocado, but even at 23 times earnings the firm does not look unduly overpriced."

Chile focused miner Antofagasta was on the back foot after it said full-year copper production fell 0.7% to 704,300 tonnes, in line with guidance. Other miners were mixed, with BHP Billiton down but Glencore and precious metals producers Randgold and Fresnillo all higher as gold rose and the latter reported record annual silver production in its fourth quarter production update.

Housebuilder Crest Nicholson slipped after reporting a rise in full-year pre-tax profit, with revenue and volumes edging up, as it announced that Patrick Bergin has been promoted to the role of chief executive officer with effect from 22 March.

WH Smith fell as the retailer posted a drop in sales over the Christmas period, mostly on the back of a weaker performance from its high street stores.

Polymetal was in the red as it reiterated its fourth-quarter production guidance and said there will be no special dividend for 2017. Gold production was up 8% year-on-year to 405,000 ounces for the final quarter and helped take annual production to 1.43m ounces, a rise of 13% and above guidance of 1.4m.

The top blue chip riser was the London Stock Exchange Group after analysts at Morgan Stanley forecast upside surprise as ahead of full year results on 2 March. Fourth-quarter volumes across secondary markets have been robust and this has carried on into 2018 with volumes year-to-date around 20% year-on-year on a like for like basis.

Pub group Wetherspoon rallied as it said that year-to-date, underlying pre-tax profit is slightly ahead of its expectations.

Morgan Advanced Materials nudged up after saying it expects changes to the US tax system to cut its US tax rate to between 28% and 29% from 30%.

In broker note action, Marks & Spencer and Dixons Carphone were hit by downgrade to 'underperform' and 'neutral' at Credit Suisse, while NMC Health was lower after a downgrade to 'neutral' at JPMorgan.

William Hill was boosted by an upgrade to 'hold' at HSBC, while Countrywide was up on the back of an upgrade to 'hold' at Berenberg, as the company announced the resignation of CEO Alison Platt.

Market Movers

FTSE 100 (UKX) 7,643.43 -1.14%
FTSE 250 (MCX) 20,538.46 -0.64%
techMARK (TASX) 3,471.54 -1.73%

FTSE 100 - Risers

London Stock Exchange Group (LSE) 3,988.00p 4.97%
Fresnillo (FRES) 1,384.50p 3.71%
Randgold Resources Ltd. (RRS) 7,278.00p 3.26%
ITV (ITV) 168.00p 2.35%
easyJet (EZJ) 1,677.52p 2.07%
Glencore (GLEN) 397.15p 1.64%
Associated British Foods (ABF) 2,791.00p 1.60%
Just Eat (JE.) 813.80p 1.52%
Anglo American (AAL) 1,747.55p 1.42%
Old Mutual (OML) 239.90p 1.18%

FTSE 100 - Fallers

Sage Group (SGE) 768.20p -6.48%
Ashtead Group (AHT) 2,086.00p -3.07%
BAE Systems (BA.) 567.40p -2.68%
CRH (CRH) 2,698.00p -2.60%
Intertek Group (ITRK) 5,048.00p -2.51%
Shire Plc (SHP) 3,424.00p -2.45%
Rentokil Initial (RTO) 296.30p -2.44%
AstraZeneca (AZN) 4,987.50p -2.23%
Centrica (CNA) 136.50p -2.19%
Croda International (CRDA) 4,498.00p -2.15%

FTSE 250 - Risers

Convatec Group (CTEC) 202.60p 5.66%
Acacia Mining (ACA) 195.65p 3.96%
Ferrexpo (FXPO) 297.90p 3.40%
Sanne Group (SNN) 744.00p 2.76%
Ashmore Group (ASHM) 433.20p 2.61%
FDM Group (Holdings) (FDM) 981.00p 2.40%
Wetherspoon (J.D.) (JDW) 1,299.00p 2.28%
Tullow Oil (TLW) 226.00p 2.17%
Daejan Holdings (DJAN) 6,180.00p 2.15%
Just Group (JUST) 149.70p 1.77%

FTSE 250 - Fallers

Mitie Group (MTO) 174.70p -5.57%
Greencore Group (GNC) 214.00p -4.46%
Vectura Group (VEC) 104.70p -4.38%
Pets at Home Group (PETS) 185.10p -3.99%
Inmarsat (ISAT) 498.70p -3.99%
Sophos Group (SOPH) 643.00p -3.96%
Senior (SNR) 279.20p -3.72%
Coats Group (COA) 75.55p -3.64%
Cobham (COB) 131.40p -3.63%
Provident Financial (PFG) 702.00p -3.52%


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