FTSE 100 ascends amid sterling's decline; Melrose Industries sees a rally

  • Investing.com
FTSE 100 ascends amid sterling's decline; Melrose Industries sees a rally

On Thursday, the FTSE 100 index rose by 0.4% to 7,455.71, reversing earlier losses, as sterling weakened by 0.4% against the dollar to 1.2460. The currency's depreciation was triggered by dovish comments from Bank of England governor Andrew Bailey and robust US services data on Wednesday. Approximately 70% of the top-flight index's constituents generate their earnings overseas, so a weaker pound tends to boost the index.

Russ Mould, investment director at AJ Bell, highlighted the uncertainty among investors about central banks' next steps regarding interest rate hikes. He noted that US markets had dipped following stronger than anticipated services sector data and a rising oil price, suggesting persistent inflation and potential further rate increases by the Federal Reserve.

In contrast, comments from the Bank of England governor questioning the necessity for additional rate hikes in the UK caused a sell-off in the pound, pushing it to a three-month low against the dollar. Mould suggested that these diverse factors are causing confusion among investors about how to position their portfolios.

In property news, data from Halifax revealed that annual house prices in the UK experienced their most significant fall since 2009 in August amid escalating mortgage costs. House prices decreased by 4.6% annually following a 2.5% drop in July. Southern England and Wales are experiencing the most downward pressure on property prices, while Scotland is demonstrating greater resilience.

On the equity markets, Melrose Industries saw a rally after it raised its annual outlook and announced trading has been exceeding expectations, partially due to higher-than-anticipated margins at its engines division. Direct Line shares also surged as the insurer increased premiums by 25% to enhance operating profit next year while also raising £520 million through the sale of its commercial lines business.

However, heavily weighted miners including Anglo-American, Rio Tinto (NYSE: RIO ), and Antofagasta (LON: ANTO ) saw declines. Insurer Beazley also fell despite remaining on track to meet guidance after posting record profits in H1. London Stock Exchange Group (LON: LSEG ) shares dropped after investors Blackstone (NYSE: BX ) and Thomson Reuters (NYSE: TRI ) sold approximately £2.75 billion of its shares.

Other market movers included paper and packaging company Smurfit Kappa which confirmed merger talks with US peer WestRock (NYSE: WRK ) but lost ground on Thursday. Pets at Home slumped following an announcement by the Competition and Markets Authority launching an investigation into the veterinary services market for household pets. Synthomer announced a £276 million rights issue causing its shares to plummet.

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