London stocks hit record high on slumping pound

 Traders sit in front of trading screens at ETX Capital in central London in January, 2017.
Traders sit in front of trading screens at ETX Capital in central London in January, 2017.PHOTO: AFP

LONDON (AFP) - The London stock market ended the day on another record high Monday (Jan 9, 2017), shrugging off weakness on Wall Street and other European markets, as Brexit concerns battered the pound.

In the meantime, eurozone indices headed south, weighed down by weaker prices on Wall Street, where investors were cashing on some of last week's gains, while the euro was steady against the dollar.

London's benchmark FTSE 100 index ended higher for the 10th consecutive session, closing up 0.4 per cent at 7,243.76 points and extending a record run higher that began ahead of the new year.

"European stocks were mostly lower on Monday, tracking a pullback in the price of oil and weak open on Wall Street. The FTSE 100 was the exception to the rule thanks to a sharp drop in the British pound that lifts the value of international earnings," said Jasper Lawler at London Capital Group.

Big multinationals led the gains thanks to the weaker sterling, "but it was the more cautious end of the spectrum that won out. Safer stocks including tobacco and pharmaceuticals outperformed the riskier basic resource sector", the expert said.

The pound tumbled to its lowest level in three months after British Prime Minister Theresa May insisted at the weekend that Britain would have control over its borders after Brexit, suggesting she would be prepared to quit Europe's trading zone to achieve it.

"The latest slide has been in response to comments from UK Prime Minister Theresa May at the weekend, when she said Britain's exit negotiations will 'not be about keeping bits of membership'," said Fawad Razaqzada at Forex.com "May's comments suggest it will be a hard exit from the EU, as Britain seeks to control immigration and law-making among other things. Though the Brexit vote has only had a limited impact on the economy thus far, the uncertainty could weigh on business spending in the months ahead," he said.

May's comments come as London prepares to invoke Article 50, which starts a two-year countdown to Britain exiting the European Union.

"The market is taking a break, there are very few new initiatives," Saxo Banque analyst Andrea Tueni said in Paris. "The market needs to take a breather until new catalysts emerge."

Elsewhere Monday, Asian stock markets climbed after a strong pre-weekend lead from New York where two of the three main indices closed at record highs.

But Wall Street started the week slightly softer.

"There's lots of turbulence, which is contributing to the more cautious tone at the the start of the week," said Patrick O'Hare of Briefing, predicting a "period of consolidation." Investors are upbeat that US President-elect Donald Trump will introduce measures that will fire up the world's top economy.

Investors were looking ahead to a speech by Federal Reserve boss Janet Yellen on Friday, which would be pored over for clues about the bank's outlook for its next interest rate hike.

With Trump's promises of big spending and tax cuts expected to fuel inflation, bets are on the Fed to hike rates at least three times this year, after December's increase.