FTSE 100 hits new record high helped by five-month low for pound
The FTSE 100 has ended a long wait to achieve a new record high.
The index, which comprises the 100 most valuable companies on the London Stock Exchange, closed Monday’s session on 8,023 points following a jump of 128 points or 1.6%.
That was the highest closing sum since February last year when the 8,000 barrier was breached for the first time in its history.
The previous record stood at 8,012.
The performance on Monday was driven by a strong showing for companies across the board, particularly financial and consumer-linked stocks such as those for retailers.
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The index has been gaining ground in recent weeks on growing hopes for a cut in UK interest rates as inflation eases – with strong evidence that the economy has turned a corner after the recession during the second half of last year.
Analysts credited the push for a new high on two main factors; confidence that a major escalation in the Middle East conflict will be avoided and a weakening in the value of the pound against the US dollar.
Sterling is trading at five-month lows against the greenback at just $1.23 and was half a cent down on the day.
This is a consequence of dollar strength as opposed to pound weakness as expectations are growing across the Atlantic that the Federal Reserve’s expected interest rate cuts are further down the track than had been predicted.
Higher interest rates tend to be supportive of a currency which, in this case, is the world’s reserve currency.
A weaker pound helps FTSE 100 constituent companies which make money in the United States.
That is because it boosts their bottom line when those dollar earnings are booked back in the UK and converted back to pounds.
The City of London has been fighting to defend its territory since Brexit
The FTSE has largely lagged growth among its rivals since Brexit and was tamed by a succession of economic shocks but has been reclaiming some ground this year due to perceived low valuations versus competing stocks overseas.
Its lack of technology companies – which have tended to perform best globally since the pandemic – has been another factor behind the FTSE’s malaise.
Trading hubs also point to a competitive disadvantage through a 0.5% transaction tax on share purchases in UK firms.
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AJ Bell investment director Russ Mould is asked if the weaker pound has contributed to Monday’s record high for the FTSE 100.
The index traditionally struggles during times of world economic uncertainty as its 100 constituents are dominated by firms whose fortunes are directly linked to demand for basic commodities such as mining and industrial stocks.
However, the signs of growth starting to emerge are a positive, not only for the FTSE 100 but also pension pots.
The broader and more domestically-focused FTSE 250 is yet to climb back above the 20,000 points level but it saw gains of 1% on Monday.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said of the prospects ahead: “With growth in the UK not shooting the lights out, and inflationary pressures showing signs of easing, there is still optimism around about the prospect of interest rate cuts coming later in the summer, which appears to have helped the FTSE 100 climb higher.
“As lower borrowing costs are forecast later this year, amid a slightly more positive outlook for the economy, housebuilders have also headed sharply higher amid hopes that stronger demand will return for new homes.
“Ocado, J Sainsbury, Next, Marks and Spencer and Tesco have also been lifted amid hopes for more clement conditions for consumers.
“A handful of FTSE 100 listed companies, which breached record levels earlier in the month, are on course to climb back up to those highs, such as Rolls Royce and BAE Systems. Aerospace stocks have been pushed higher by ongoing conflicts and post-pandemic demand.”
Business
Ex-Post Office head of IT says Paula Vennells ‘hoped to avoid’ inquiry – and reveals she blocked her number
A former Post Office executive has said she was forced to block ex-boss Paula Vennells’ phone number after the ex-CEO called multiple times asking for help to avoid an independent inquiry into the Horizon IT scandal.
Lesley Sewell, previously the company’s head of IT, told the Post Office inquiry on Thursday that former CEO Ms Vennells had reached out to her four times between 2020 and 2021.
Ms Sewell said that she blocked Ms Vennells’ number due to discomfort with the contact.
In her witness statement to the probe, Ms Sewell said that one of Ms Vennells’ emails referenced the need to fill in memory gaps regarding Horizon and “Project Sparrow”, a committee addressing issues with forensic accountants who identified flaws in the accounting system.
“Paula contacted me on four occasions in total. I recall blocking her number after the last call as I did not feel comfortable with her contacting me,” Ms Sewell said.
“I had not spoken to Paula since I had left POL [Post Office Limited] in 2015.”
Lesley Sewell giving evidence to the Post Office inquiry. Pic: PA
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According to Ms Sewell’s testimony, former chief executive Ms Vennells said that she had “been asked at short notice” to appear before a parliamentary select committee on “all things Horizon/Sparrow and need to plug some memory gaps”.
Ms Sewell says Ms Vennells added: “My hope is this might help avoid an independent inquiry but to do so, I need to be well prepared.”
Ms Sewell, who struggled to contain her emotions and broke down in tears while giving her oath at the start of her inquiry evidence, was offered support and breaks as needed by chairman Sir Wyn Williams.
Sir Wyn told the former executive: “Ms Sewell, I appreciate this may be upsetting for you, Ms Price will ask you a number of questions in a proper and sensible manner, but if at any time you feel you need a break, just let me know, all right?”
Lesley Sewell taking the oath at the Post Office inquiry. Pic: PA
The Post Office has faced significant scrutiny following the ITV drama Mr Bates Vs The Post Office which highlighted the Horizon IT scandal.
The faulty system led to the prosecution of more than 700 sub-postmasters between 1999 and 2015, with many still awaiting full compensation despite government announcements regarding payouts for those with quashed convictions.
London City Airport will on Thursday name its first permanent female chief executive as it targets approval of an expansion plan that would create nearly 1,500 jobs.
Sky News understands that the Docklands airport has told staff that Alison FitzGerald, who has been co-CEO since January alongside finance chief Wilma Allan, has landed the role.
A woman wearing a face mask walks by London City Airport, which suspended its operations during the pandemic
She replaces Robert Sinclair, who left in January after six years to become boss of the High Speed 1 rail link.
The airport is owned by a consortium of Canadian pension funds and Kuwait’s sovereign wealth fund, which have backed a plan to increase its annual passenger traffic from about 6.5m to 9m.
It is appealing against Newham Council’s rejection of a planning application that would see it extend operating hours at the site, which is popular with City commuters.
The airport’s proposals include no increase in the annual number of flights and, in what it claims is a first for a UK airport, a commitment that only cleaner, quieter, new generation aircraft will be allowed to fly in any extended periods.
The runway at London City Airport
The appeal is being reviewed by the Independent Planning Inspector.
Its change of leadership makes London City the second of the capital’s airports to name a new CEO in quick succession, following the arrival at Heathrow of Thomas Woldbye last year.
“London City delivers one of the best passenger experiences in the UK and I’m committed to building on this success even further,” Ms FitzGerald said.
Representatives of Thames Water’s multinational syndicate of shareholders are poised to quit as directors of its corporate entities after refusing to inject the billions of pounds of funding required to bail it out.
Sky News has learnt that a number of board members at companies connected to Kemble Water Finance, Thames’s parent, are expected to resign in the coming days.
City sources described the move as “the logical next step” after the owners of Britain’s biggest water utility said they would not commit more than £3bn to help upgrade its ageing infrastructure and shore up its debt-laden balance sheet.
A default on part of Thames Water‘s holding company debts last month has raised the prospect that the company is heading towards special administration, a form of insolvency that would effectively leave the government liable for managing a utility firm which serves nearly a quarter of Britain’s population.
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Thames Water under threat
Thames Water is owned by a group of sovereign wealth funds and pension funds from countries including Abu Dhabi, Australia, Britain, Canada and China.
A number of the investors are represented on boards which sit at various points in the group’s labyrinthine capital structure.
It was unclear on Wednesday whether Michael McNicholas, a representative of the giant Canadian pension fund Omers and who sits on the board of Thames Water Utilities Limited, was among those in the process of stepping down.
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Along with the rest of the privately owned water industry, Thames Water faces a crucial moment next month when Ofwat, the industry regulator, publishes its draft determination on companies’ five-year business plans.
The draft rulings will be subject to negotiation before final versions are published in December.
Thames Water and a spokesman for Kemble declined to comment.
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