Pound dents FTSE on inflation rise, Brexit deal hopes

The FTSE 100 has dipped, weighed down by the pound’s rise on Brexit trade deal hopes as bullishness spurred by Covid-19 vaccine breakthroughs continued to cool.

The UK blue-chip index fell 20 points, or 0.3%, to 6,345 as the pound, up 0.4% against the dollar at $1.329, weighed on companies’ overseas earnings.

Sterling gained more support from higher-than-expected inflation, as the Office for National Statistics reported a rise in the consumer price index to 0.7% in October, up from 0.5% in September. 

Price increases in clothing and footwear drove the rise, although inflation remains well below the Bank of England’s 2% target. The retail price index, which includes the impact of mortgage costs, rose from 1.1% to 1.3%.

‘Inflation looks well contained, putting little pressure on the Bank of England to raise rates any time soon,’ said Laith Khalaf, analyst at AJ Bell.

‘Indeed, monetary policy may yet loosen before it tightens again, though the curative economic potential of vaccines may persuade the central bank to stay the course until the science hopefully comes to the rescue.’

Retail data from the US did little to cheer markets, with Wall Street closing lower last night, as sales rose just 0.3% last month, missing the 0.5% rise forecasted.

‘Signs that resurging Covid-19 cases and the lack of fiscal stimulus is impacting on the US consumer was enough of an excuse for vaccine optimism to fade and stocks to drift lower,’ said Fiona Cincotta. market analyst at City Index.

Engineer Spirax-Sarco (SPX) fell to the bottom of the FTSE 100, shedding 4.1%, or 495p, to £114.20 despite delivering an in-line trading update that kept full-year forecasts unchanged.

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Investment platform Hargreaves Lansdown (HL) followed Spirax-Sarco down, losing 4%, or 65p, to £15.50 after a report that founder Stephen Hargreaves had sold 6.7m shares at a discount.

‘Mid-cap’ companies on the FTSE 250 climbed 0.2%, led by Micro Focus (MCRO), which soared 20%, or 56p, to 328p after the software firm forecasted margins would be at the upper end of expectations this year.

(2:19) Asian stocks mixed

SINGAPORE: Asian stocks were mixed on Wednesday as traders digested recent rallies on US election results and vaccine developments. 

Federal Reserve chairman Jerome Powell set the tone on Tuesday by saying the US economic recovery still had a ‘long way to go’. This brought rising infections in the country – and around the world – back in focus. 

Japan’s Nikkei 225 index shed 1.1% while the Kospi in South Korea added 0.3%. Hong Kong’s Hang Seng Index rose 0.1%.

The Shanghai Composite picked up 0.2% and the S&P ASX 200 in Australia gained 0.5%. The Taiwan Capitalization Weighted Stock Index was up 1.3%.

‘The Asian docket for today appears to be relatively sparse, and will include Bank of Thailand’s central bank meeting, where policymakers are expected to keep the benchmark rate unchanged at 0.5%.

‘Covid-19 cases across Asia, especially India, continued to rise. India’s capital, New Delhi, has recorded an average of 7,000 new cases daily over the past week,’ UOB Global Economics and Markets Research said in a note. 

India’s Nifty 50 fell 0.2% and FTSE Bursa Malaysia KLCI gave up 0.7%. The Straits Times Index in Singapore climbed 0.2%. Thailand’s SET Index was flat. 

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Wall Street bulls took a breather on Tuesday after running indices to record highs. Traders focused on rising Covid-19 infections as new restrictions were introduced in Ohio, Illinois and Pennsylvania.

US retail sales grew at the slowest pace in six months. October’s 0.3% figure amplified the need for stimulus to push the economy along. 

The S&P 500 recorded its first drop in three sessions of 0.5% to 3,610. The Dow gave up 0.6% and the Nasdaq Composite fell 0.2%.

Tesla (TLSA.O) surged 8.2% on news that it would join the S&P 500 in December. Shares of some competitors fell. Xpeng (XPEV.K) slid 2.3% and Li Auto (LI.O) lost 1.4%. 

Nio (NIO.N) jumped 2.1% after topping third quarter estimates. Nikola (NKLA.O) added 0.6% and Workhorse Group (WHKS.O) advanced 7.8%. 

Edward Moya, senior market analyst at Oanda, said there were ‘growing concerns the current Covid wave will make this a “difficult winter”. 

‘Wall Street does not have a catalyst to keep the climb going to uncharted territory, but they do have a plethora of short-term risks,’ he added. 

The indices were set to open in the red, with S&P 500 and Dow futures down 0.5%. Nasdaq futures fell 0.4%. 



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