The pound climbs to a level not seen since 2018, keeping a cover on the FTSE 100


London stocks struggled for traction on Monday, boosted by shares of mining companies as commodity prices climbed, but were held back by a strong pound.

The FTSE 100 UKX index,
traded flat at 7133, while the pound GBPUSD,
+ 1.14%
jumped to $ 1.4120, a level not seen since the start of 2018. A strong domestic currency weighs on the profits of many large blue chips that derive income from abroad. When the pound is lower, the opposite happens.

The strength of the pound came after the Scottish National Party narrowly failed to secure an outright majority in the Scottish Parliament election. Party leader Nicola Sturgeon told British Prime Minister Boris Johnson that another independence referendum was inevitable.

Lily: Scottish independence vote ‘a matter of when, not if’, says Nicola Sturgeon

“The pound’s reaction suggests that with the SNP unable to secure that absolute majority, there is no clear democratic mandate to pressure London to grant another referendum anytime soon. Therefore, this is a narrow victory for pro-union forces as the conservative government can continue to reject calls for another vote, ”said Marios Hadjikyriacos, investment analyst at XM, in a note to clients.

“With the political risk gone for now and the Bank of England laying the groundwork to end QE [quantitative easing] later this year, as the UK economy shifts into high gear, the outlook for sterling remains favorable, ”the analyst said.

A rise in commodity-linked stocks could not lift the main London index.

Shares of major oil companies BP BP,
+ 0.69%

+ 0.51%
and Royal Dutch Shell RDS.A,

increased by 2% and 1.6% respectively. Oil prices rose earlier today, before retreating following a cyberattack on a key fuel line in the United States operated by Georgia-based Colonial Pipeline, which supplies about 45% of the fuel used by East cost. Under such an attack, hackers cripple a company’s computer systems and networks, demanding ransom to reverse the situation.

Futures for June CLM21 crude oil futures contracts,
+ 0.09%
and the international benchmark Brent BRNN21,
+ 0.16%
each fell 0.6% and RBM21 natural gas prices,
+ 0.69%
also fell by 1.5%. Analysts have expressed concerns about possible shortages in the United States if the colonial pipeline situation is not resolved.

Elsewhere, mining stocks rose as iron ore futures in Singapore exceeded $ 226 a tonne, boosted by demand from China and a general recovery in the global economy. Iron ore prices also jumped last week. HGN21 July Copper Futures,
were earlier up 2.5% before returning to trade at $ 4.7530, hovering near Friday’s closing high. Copper prices rose 6.3% last week, the largest weekly increase since the week ended February 19.

Rio Tinto RIO shares,
+ 1.88%

+ 1.88%
jumped 4% and BHP Group BHP,
+ 2.32%
climbed 3.8%.


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