9th Jan 2017 12:19
LONDON (Alliance News) - Stock prices in London were mixed on Monday at midday, with a weak pound supporting another session of gains in the FTSE 100 index of large caps, having touched a new record high at the open.
Sterling suffered from comments by UK Prime Minister Theresa May over the weekend which appeared to point toward a so-called 'hard' Brexit from the European Union.
May, in an interview with Sky News, said some people had suggested the UK could "keep bits" of EU membership as it looks to leave the bloc.
But the prime minister appeared to shut down that possibility: "We are leaving. We are coming out. We are not going to be a member of the EU any longer."
"We will, outside the EU, be able to have control of immigration and be able to set our rules for people coming to the UK from member states of the EU," May added.
Naeem Aslan, chief market analyst at ThinkMarkets UK commented: "The political crisis is brewing and you can see that when you look at pound. The UK government is playing with fire and creating more uncertainty. Last year, we said that the pound has the tendency of touching the mark of USD1.18 and we are still maintaining our call."
The pound hit a low of USD1.2124 on Monday, its worst level since October 2016, when the UK currency touched a fresh 30-year low at USD1.1806 amid a 'flash crash', later blamed on a 'fat finger' error. At midday, sterling was quoted at USD1.2162.
This currency weakness helped the FTSE 100, which is packed with dollar-earning multi-nationals.
Although the blue-chip index was giving back some of the strong gains seen at the open, it remained on course to add a thirteenth consecutive session of gains, following a strong Christmas period. The index has set new record closing highs in the last seven sessions.
The FTSE 100 touched a high of 7,239.26 at the open and was up 0.1%, or 4.93 points, at 7,214.98 at midday.
While large-cap index benefited from the weak pound, the FTSE 250, filled with companies more sensitive to the UK domestic economy, was suffering. The mid-cap index was down 0.2% at 18,310.79. Meanwhile, the AIM All-Share was up 0.3% at 865.39.
The BATS UK 100 index was up 0.2% at 12,188.07, the BATS 250 was down 0.3% at 16,639.00, and the BATS Small Companies was up 0.3% at 10,932.06.
British house price inflation accelerated unexpectedly at the end of the year, survey data from the mortgage lender Halifax and IHS Markit showed on Monday.
House prices climbed 6.5% in three months to December from a year before after rising 6.0% in the three months ended November. Economists had expected the inflation to ease to 5.8%. On a monthly basis, house prices grew at a faster rate of 1.7% in December, following a 0.6% increase in November, above the 0.3% climb forecast by economists.
Following the house price data, ThinkMarkets' Aslam said that while "there is no doubt" that the UK economy has performed better than forecast, "this all could change very fast".
Meanwhile, eurozone economic sentiment rose more-than-expected in January driven by better assessments on the current situation and economic outlook, survey results from Sentix showed. The economic sentiment index for eurozone climbed to 18.2 from 10.0 in December, well above the economists' forecast.
The euro benefited from the positive economic data, putting yet more pressure on the pound, quoted at EUR1.1566. The decline in sterling came following a relatively stable performance against the single currency in the last month and a half of 2016, dropping to levels not seen since mid-November. Against the dollar, the euro was quoted at USD1.0525.
Meanwhile, preliminary data from Eurostat showed that eurozone jobless rate remained unchanged at 9.8% in November at its lowest level since the middle of 2009. This was in line with economists' expectations.
The CAC 40 index in Paris was down 0.8%, while the DAX 30 in Frankfurt was 0.6% lower.
In New York, stocks were called for a flat to lower open, with the Dow 30 pointed down 0.2%. The S&P 500 and Nasdaq Composite were seen down 0.1% and flat, respectively, having both set new record closing highs on Friday, on the back of an upbeat US jobs report.
On Friday the US Labor Department said nonfarm payroll employment climbed by 156,000 jobs in December, less that the expected increase of about 175,000 jobs, but the average annual rate of growth in average hourly employee earnings accelerated to 2.9% from 2.5% in November.
Still in the economic calendar on Monday is the US labor market conditions index at 1500 GMT, while US consumer credit is at 2000 GMT.
Back in London, Glencore was the best performer in the FTSE 100, following a positive note by Barclays. The bank said the miner is "in the right place at the right time", reinstating its Overweight rating on the stock.
"We believe Glencore's commodity exposure and growth potential are well suited to the current macro conditions while the valuation metrics speak for themselves," said Barclays analyst David Butler. "We argue that fears over asset quality are unwarranted."
Babcock International Group was down 2.1% after the defence outsourcer was downgraded to Hold from Buy by Deutsche Bank.
In the FTSE 250, Ferrexpo was up 6.8%, the best mid-cap performer. The iron ore pellets producer said its iron-ore pellet production fell in 2016 year-on-year but sales rose, as did its average selling price.
Petrofac was 2.8% higher. The oil services firm said it has won a contract worth around USD600.0 million to handle the engineering, procurement and construction of the Salalah LPG extraction project in the southern part of Oman.
By Daniel Ruiz; [email protected]
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