If ever there was glaring evidence that the stock of large cap companies which are listed on the London Stock Exchange are completely uninfluenced by the highly liquid currency markets, this week’s FTSE 100 performance is it.
In fact, even a sudden increase in the value of the Pound, Britain’s sovereign currency, has not affected the performance of the basket containing the 100 most prestigious blue-chip companies listed on London’s premier trading venue.
During the past few days, and especially in the advent of the recent coronation of King Charles, the British Pound has been performing very well against its major peer, the US Dollar, rising to its highest point in over a year during the past few days.
The currency in which the 100 well established corporate giants whose stocks make up the FTSE 100 index report their metrics may well be Pounds, but despite the sudden optimism in the British economy, the FTSE 100 has been losing value.
Over the past five days, the FTSE 100 index has dropped by 108 points, resting at 7,765 at 10:00 BST today.
In fact, yesterday during the London trading session, the FTSE 100 dropped as low as 7,702 points, which is its lowest point in more than one month.
The FTSE 100 has languished a bit since the middle of March, when it dropped significantly to 7,335 by March 15, a far cry from the 8,001 points registered on February 20th, which was a euphoric moment for shareholders of British companies and traders alike, as the 8,000-point threshold had been broken.
It was just two years ago when the airwaves were awash with superlatives after the FTSE 100 index broke the 7,000-point mark. To see it go up by another 1,000 points in February 2023 was remarkable to say the least.
For now, those days are gone, and whilst the Pound goes from strength to strength against its transatlantic rival major currency, the British corporations on the FTSE 100 are experiencing a lull.
Some analysts are laying the blame at the door of very generic sets of circumstances such as the potential increase in interest rates that may be implemented by the Bank of England on Thursday this week.
Yes, that would perhaps cause extra costs for corporations which would have to pay more to service their commercial borrowings, but surely that would also affect private individuals, and therefore influence the Pound downwards? The Pound is stronger than it has been for a while, so consumer confidence remains high.
One of the components of the FTSE 100 index is sportswear retailer JD Sports, which is currently a subject of potential acquisition by French giant Groupe Courir for an expected £520 million, however that alone would be unlikely to have this much of a dampening effect on the entire index.
There has been a slight slowdown in the growth of Chinese exports, but that did not stop a healthy trading session take place in the Asia Pacific time zone today, but the strong levels of trading activity did not raise the FTSE 100’s value in the early hours of the London session and later hours of the Asian session.
Perhaps there is some weight behind the conservative approach being assumed in the run up to the Bank of England’s interest rate announcements this Thursday.
