FTSE 100 weighed down by strong pound and downgrade for Standard Chartered

FTSE 100 weighed down by strong pound and downgrade for Standard Chartered

With a lack of technology stocks to join the global equity move higher on Wednesday, the FTSE 100 was hovering around the flat line, weighed by a downgrade for Standard Chartered and a strong pound.

The main index

was unchanged at 5,609.50 in a week that has seen it go nowhere. That is as the pound

rose 0.3% against the dollar to $1.3670, hitting $1.37 at one point, a level that hasn’t been seen since 2018. Pound strength tends to weigh on international companies listed in London that derive revenue overseas.

Some attributed the pound’s strength to general optimism over the U.K.’s COVID-19 vaccine rollout, and fresh data.

“Earlier today, inflation in the U.K. up-ticked, signaling [to] the BoE [Bank of England] Governor Andrew Bailey that there is no need for further stimulus, at least for now. On the other side of the pond, the U.S. dollar remains under pressure as Biden prepares to become president. As a result, our bullish bias on the Cable remains intact for now, as 1.3750 becomes our new upside target,” said Rony Nehme, chief market analyst at Squared Financial, in a note to clients.

Data showed consumer prices rose 0.6% on the year in December, compared with a 0.3% rise in November. 

For global markets, technology was a driving force after some well-received results in Europe and for U.S. streaming giant Netflix
Investors were also focused on the inauguration of President-elect Joe Biden.

Back in London, shares of Standard Chartered

fell 3%, after the bank was downgraded to neutral by analysts at Citigroup. The bank “has a stronger balance sheet than five years ago and buybacks are likely during 2021, but we do not see any obvious catalysts in the near term,” said a team led by Ronit Ghose, in a note to clients.

In the U.K., the team prefers domestic banks due to higher potential capital return yields, “resilient” revenues supported by mortgage demand, and “conservative positioning” under International Financial Reporting Standards. In Hong Kong, Ghose said they prefer HSBC

Elsewhere in London, shares of luxury-goods maker Burberry

rose 3.6% after reporting a fall in three-month underlying sales, partly due to COVID-19-related store closures, but strong sales growth in Asia.

Mining stocks were higher across the board, led by BHP Group

up 3.2% after the company lifted its iron ore guidance. Shares of Rio Tinto rose 2.4%, those of Glencore

climbed 3.5%, and stock in Anglo American

gained 2.9%.

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