FTSE 100 Reaches New Closing High, Boosted by Weak Pound
The FTSE 100 index climbed to a new all-time closing high on Monday, driven by the falling value of the pound. The index closed at 8,023.87 points, surpassing its previous record of 8,012.53 set in February 2023. The rise in the index was largely attributed to the weakness of the pound, which reached its lowest point against the US dollar in around five months, dropping 0.2% to $1.23.
The decline in the pound led to a boost for companies in the FTSE 100 that generate revenue abroad, as their earnings become more valuable when converted to sterling. Notably, energy giants Shell and BP are among the members of the index that benefit from this exchange rate effect.
In addition to oil companies, other notable risers on the day included retailers such as Sainsbury’s, Marks & Spencer, Tesco, and Ocado. Sentiment among investors was lifted by hopes that tensions in the Middle East may ease, which contributed to a decline in oil prices.
However, Rachel Winter, partner at Killik & Co, emphasized that the strong performance by the FTSE 100 was primarily a result of the weak pound. She highlighted that the index contains a significant number of international companies that earn revenue in dollars and report profits in sterling, making them more profitable in sterling terms when the dollar strengthens.
It is worth noting that the FTSE 100 has experienced a relatively modest gain of 4% this year compared to some of its European counterparts. The CAC index in France and the DAX index in Germany have both risen by more than 6%. Additionally, the index has lagged behind major US indices like the S&P 500, which has increased by 5.65%.
London’s status as a financial center faces challenges in attracting new stock market listings. Businesses considering selling shares are looking towards the US, which offers higher pay packets for executives and access to a broader investor base willing to pay higher share prices. Shell, the energy giant, has recently announced its consideration of moving its headquarters to the US, highlighting the challenges faced by London in the global stock market landscape.
