The Footsie hit an all-time trading high today boosted by gains in its giant international companies’ share prices, as the pound remained under pressure from ‘hard Brexit’ concerns.
Around midday, the FTSE 100 index hit its best-ever intra-day level of 7,129.83, surpassing the previous peak of 7,122.74 reached on April 27 last year.
That came as sterling suffered another bad day, losing 0.5 per cent versus the dollar at $1.2296.
However, the FTSE 100 is benefiting from the sell-off in the pound, as the weak currency boosts the earnings of London-listed companies with international profits that are now worth more in pounds and pence thanks to sterling’s decline.
New record: The Footsie hit an all-time trading high today boosted by gains in international stocks as the pound remained under pressure on ‘Hard Brexit’ concerns
All eyes are now on whether the FTSE 100 can deliver a record close today, above the 7,103.9 seen in April 2015.
The UK blue chip index eased back from its trading high, but at lunchtime was still up 20.8 at 7,118.3, on course to also surpass that highest-ever closing level.
The pound was hit today after leaked government papers reportedly laid bare the cost of leaving the European Union.
On currency markets over the past week, sterling has reached levels against the dollar not seen since the mid-1980s and suffered a 6 per cent ‘flash crash’ overnight between Thursday and Friday.
The documents, seen by The Times newspaper, showed that leaving the single market and switching to World Trade Organisation rules would cause the UK’s gross domestic product growth to fall by up to 9.5 per cent and cost the Treasury up to £66billion per year, compared with if the country remained in the EU.
Tom Stevenson, investment director for personal investing at Fidelity International, said: ‘The pound has fallen further today as fears have grown that financial companies are re-assessing their London operations and a leaked report put a £66bn price tag on Brexit.
‘Meanwhile Michael Saunders, the newest member of the Monetary Policy Committee said that the Bank of England would look through any short-term, currency-fuelled rise in the cost of living. The combination of a weak pound and lower for longer interest rates is good news for the UK’s international stock market with many exporters and overseas earners.
‘Since reaching its previous high last year we have seen the markets fluctuate, hitting a low in February 2016 of 5,499, before recently bouncing back today to record an increase of 30 per cent. The question that many investors will now be asking themselves is can the market sustain this current run?
‘Despite reaching a new high, the valuation of the UK market is not excessive and still looks attractive for investors looking to shares for income, growth and stability.’
Yet, while the stock market has soared since the Brexit vote, the pound is causing traders a headache.
Connor Campbell, a financial analyst at SpreadEx, said the news has ‘thrown more fuel on the fearful fire… leaving the markets to deal with another day of sterling dread’.
He added: ‘With that in mind, the pound, of course, has woken up wheezing and spluttering, continuing to shed an amount of blood that is apt for a month ending with Halloween.’
However, Paresh Davdra, CEO and Co-Founder of RationalFX, said: ‘Although the pound’s value would appear to be a Brexit warning come true, a more realistic value for sterling as opposed to the overvalued currency we saw before the referendum may be advantageous for the UK when it finally gets to trade negotiations.
‘With that in mind, the biggest danger that the UK economy currently faces is the reactionary fears in the market and media about Brexit overtaking the reality of the economic situation.’
The fall in sterling once again gave a boost to many of the FTSE 100’s international companies which earn much of their revenues in US dollars, and therefore get a currency-related accounting lift on conversion.
Among the beneficiaries standing out today were Greek bottling firm Cocal Cola HBC, up 1.9 per cent, and luxury goods group Burberry, ahead 2.5 per cent.
WHY HAS THE FTSE 100 RISEN AS THE POUND HAS FALLEN?
The London stock market has powered ahead as sterling’s woes have buoyed stocks.
Why does this occur?
The market gains are being driven by foreign firms listed in London and a rally among UK companies which make a large amount of their sales in US dollars.
The FTSE 100 in particular has benefited, as around three-quarters of earnings from FTSE 100 companies come from outside the UK.
As well as overseas firms with a London listing, UK industrial companies have also fared well, with the likes of engine maker Rolls-Royce and defence giant BAE Systems joining in the latest rally.
So will the FTSE keep rising?
Brexit fears may hit stocks at some stage as the negotiations play out, depending on the outcome for the UK, but many believe there are more market gains to come.
The strength of the FTSE 100 is also seen reflecting the resilience of the UK economy, which has held up well as the shock of the Brexit vote has passed and following swift action by the Bank of England.
Down: US stock futures still pointed to opening losses today on Wall Street, reflecting the oil price retreat, which could curb the Footsie’s attempts to reach its closing high
European markets were also higher today, with the CAC 40 index in Paris up 0.4 per cent, and Frankfurt’s Dax 30 index ahead 0.5 per cent supported by a pair of strong ZEW economic sentiment index readings for both Germany and the Eurozone.
Global markets also extended yesterday’s strong gains made after crude prices surged above $53 a barrel on news Russian president Vladimir Putin had voiced support for Opec’s planned production cap.
Today, however, Brent crude eased back slightly, down 0.7 per cent to $52.77 a barrel, surrendering the one-year highs touched in the previous session after the International Energy Agency’s latest monthly report said global supplies rose in September.
US stock index futures still pointed to moderate opening losses today on Wall Street, reflecting that oil price retreat, which might curb the Footsie’s attempts to reach its closing high.
Earnings will also be in the spotlight in New York today with the unofficial start of the third quarter reporting season kicking off tonight, as traditionally, with numbers from US metals giant Alcoa.