FTSE higher despite sterling plunge
Fiona Cincotta August 8, 2018 4:41 PM
Although the FTSE index managed to finish the day on a higher note most European markets were lower on the day taking their cue from a weaker open on Wall Street.
The Sino-US trade war was back on centre stage as China’s Commerce Ministry said it will retaliate with import tariffs of 25% on $16 billion worth of US goods including oil, steel, cars and medical equipment. The move comes in response to an equivalent set of tariffs which the US will start applying on Chinese imports from 23 August.
Pound hits fresh low
The possibility of a no-deal Brexit has been looming over the pound for a while now but it seems to have asserted itself in traders’ minds even more this week since Bank of England governor Mark Carney said that the likelihood was now “uncomfortably high”, a sentiment later echoed by Britain’s trade secretary Liam Fox. The pound sell-off gathered pace Wednesday causing it to drop to a fresh one-year low of 1.2858 against the dollar before gaining a few pips later in the day. Sterling also fell to 1.109 against the euro, the lowest level in nine months. Brexit concerns are likely to remain the key driver for the currency until Friday when preliminary second quarter UK GDP data will be released alongside the June manufacturing and industrial production figures.
Another high street shop flirts with insolvency
DIY chain Homebase plans to close up to 80 of its stores next week as it battles to stay financially viable. Rising labour costs, higher property taxes and growing competition from online retailers have combined with a waning appetite by British consumers to spend money on home improvement, creating a toxic mix that is hurting not just this retail chain but many others. Earlier this year Mothercare, Carpetright and New Look opted to use company voluntary agreements, a contract that gives companies a way to avoid insolvency. Homebase now plans on choosing the same route as the agreement makes it possible for the company to change deals with landlords or abandon them altogether.
US report pushes oil prices lower
After a few days of higher prices caused by fears that renewed US sanctions against Iran would cause a disruption in supplies, oil prices plunged Wednesday following US data showing that local consumers bought far less oil than expected. The Energy Information Administration said that domestic crude supplies declined by 1.351 million barrels during last week, only about a half of the decline that was expected. West Texas Intermediate prices immediately plunged 2.53% and Brent Crude followed with a 2.32% decline.
Earnings from Legal & General and Cineworld due Thursday
As the current earnings season is drawing to a close there are still results due from Legal & General Thursday and cinema chain Cineworld.
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