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Pound's fall boosts FTSE but domestic stocks dive

FTSE 100 gains boost from sterling's slump as election results point to hung parliament, but domestic stocks hit hard.

 
Pound's fall boosts FTSE but domestic stocks dive

The pound's fall has boosted the FTSE 100, but domestic UK stocks have fallen heavily, as the results of the general election pointed to a hung parliament.

The UK blue-chip index rose 79 points, or 1.1%, to 7,528, buoyed by a slump in sterling, trading 2.2% lower against the dollar at $1.267, as the Conservative party looked set to lose its majority.

A weak pound tends to support the FTSE 100, whose members rely on overseas markets for around three-quarters of their revenues.

But there was a big split in the index between those companies with high levels of overseas earnings which gained an immediate boost from pound's fall, and those which make the bulk of their money in the UK.

House builders and banks were among the heaviest fallers. Among the builders, Taylor Wimpey (TW) dropped 4.1% to 176p, Persimmon (PSN) was down 3.1% at £23.36 and Barratt Developments (BDEV) traded 2.9% lower at 572.9p.

Lloyds (LLOY) was the worst hit bank, down 3.6% at 68.2p, while Royal Bank of Scotland (RBS) fell 2.5% to 250.7p.

Among those at the top of the FTSE 100 leader board were multinational companies with a high proportion of overseas earnings, like luxury goods maker Burberry (BRBY), up 2.6% at £17.63, drinks giant Diageo (DGE), 2.4% higher at £23.40 and consumer staples group Unilever (ULVR), rallying 2.1% to £43.59.

The more domestic-focused FTSE 250 index fared worse, down 99 points, or 0.5%, at 19,643. Capita (CPI) was the biggest faller, down 4% at 520.5p, while builders Bovis (BVS) and Bellway (BWY) were hit, falling 4.1% to £30.76 and 3.1% to £27.55 respectively.

'It looks like it is going to be a long day, as investors try and work out what this means for Brexit,' said Connor Campbell, financial analyst at Spreadex. 'Despite calls for her to resign, reports suggest that Theresa May - whose self-arranged coronation lies in tatters - is going to cling on as prime minister, something that arguably doesn't do the country any favours at the negotiating table.'

4 comments so far. Why not have your say?

Hotrod

Jun 09, 2017 at 13:53

Why do financial journalists get so dramatic. The words "dive" "slump" etc are not appropriate. I note the stocks mentioned have now recovered somewhat as investors see the initial dip as a buying opportunity.

Which ever side forms the next government they will have to take into account the majority of voters wishes. Specifically: less austerity, and more tax at the upper levels. This should translate into more disposable income for the less well off.

So my hunch is the pound will recover once a new budget is announced.

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SDRL

Jun 09, 2017 at 15:05

The pound dropping will be stimulative to the UK economy by making their products more competitive. When financial journalists are perplexed it is a good time to buy UK stocks.

report this

RBNF

Jun 09, 2017 at 20:01

SDRL

So why did the initial drop of 12% in sterling post the EU referendum translate into a drop from 1st to last in the G7 league table in the space of 9 months?

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SDRL

Jun 10, 2017 at 01:47

RBNF,

FYI:

http://news.sky.com/story/uk-manufacturing-boosted-by-surge-in-demand-for-british-goods-10904697

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