The exporter-heavy FTSE 100 was weighed down by a strong pound as Lloyds (LLOY) tried to rally the index by resuming its dividend, while investment trusts did their best to hold back mid-caps.
The main market added to losses racked up yesterday in the wake of a US tech stock sell-off, dropping 39 points, or 0.6%, to 6,585.
The index was scuppered by relentlessly strong sterling, which jumped 0.46% this morning to trade at $1.4172 against the dollar.
‘The idea that the UK could be back to ‘normal’ by the summer seems to have finally sunk in for sterling,’ said Spreadex analyst Connor Campbell.
‘Cable surged by half a percent after the bell, striking a fresh three-year high of $1.4175…All this spelled disaster for the FTSE. With its multinational constituents uncomfortably eyeing the pound’s blockbuster performance, the index tumbled.’
HSBC (HSBA) was the biggest loser, down 2.9% at 415p, adding to losses made yesterday after it reported profits slumped by a third but resumed the dividend. Banking peer Lloyds fared much better despite profit crashing 70% as investors were buoyed by the return of its dividend.
Shares jumped 2%, or 80p, to 40p as AJ Bell investment director Russ Mould said ‘expectations were not pitched too high but it is still an achievement that the numbers cleared this low bar’.
‘However, like the rest of the sector, Lloyds is unlikely to enjoy a smooth drive back to normality thanks to a very unhelpful set of circumstances,’ he said.
‘Interest rates are through the floor, squeezing margins; its ability to pay out dividends is constrained by the regulator; and bad debts have spiralled as a result of the economic impact of coronavirus.’
The soaring pound helped push the domestically-focused FTSE 250 up 67 points, or 0.3%, to 21,125, led by convenience food manufacturer Greencore (GNC), which jumped 6.4%, or 9p, to 157p on the back of analyst upgrades.
The mid-caps climbed despite investment trusts doing their best to hold the index back. JPMorgan Japanese (JFJ) led the charge, losing 3.8% to trade at 673p.
It was followed by:
- Fidelity China Special Situations (FCSS) down 2.5% at 423p
- Baillie Gifford Shin Nippon (BGS) 2.4% at 237p
- Baillie Gifford Japan (BGFD) down 2.1% at £10.70
- Herald (HRI) down 2% at £21.25
The hangover tech sell-off was the source of the problem for the trusts, which fell for a second consecuitve day, with the FTSE Equity Investment Instruments declining 1.4% and underperforming the wider London market. The tech sell-off hit Asian markets hard, reflected in the biggest losers this morning.
‘Hong Kong’s Hang Seng index slumped 3% as tech-related stocks sold off,’ said Mould. ‘the worst performer was stock exchange operator Hong Kong Exchanges and Clearing, which dived 8.8% on news of a tax hike on stock trading in the region.’