The FTSE 100 has come off the top as sterling flexes its muscles on foreign exchange markets.
With the pound up more than a third of a cent at US$1.3364 against the US dollar, enthusiasm to chase UK blue-chips higher waned in the second half of the morning trading session.
The FTSE 100 was hovering around the 7.500 level, up 148 points (2.0%) on the day.
Disappointing PMI data for the UK did not have much of an effect on sentiment. Many traders took the view that pre-election and pre-Brexit uncertainties had led to overly cautious decisions by purchasing managers but things should pick-up now the brakes are off following last Thursday’s General Election result.
“The decline in the composite PMI to a 41-month low in December shows that businesses were on tenterhooks ahead of the election, with uncertainty about its outcome and Brexit dampening activity,” said Samuel Tombs, the chief UK economist at Pantheon Macroeconomics.
“On past form, the composite PMI is consistent with a 0.2% quarter-on-quarter decline in GDP in Q4. The PMIs, however, have tended to overplay the impact of political uncertainty on GDP growth; they have under-predicted the rate of quarter-on-quarter growth by 0.2pp [percentage points] on average over the last four quarters. Note too that the surveys were conducted between December 5 and 12, so they do not tell us anything about the response of business confidence to the election result,” Tombs added.
Source – Proactive Investors