FTSE 100 hits record high as Brexit fears push pound below $1.23

Sterling has dropped past the $1.23 mark on Tuesday

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The FTSE 100 index has gone above its all-time intra-day high, boosted by a sharp decline in the value of the pound.

The pound has fallen to its weakest level since the financial crisis in early trading on Tuesday as worries persists over the UK’s economic prospects outside the EU.

This sent the FTSE 100 index of top blue chip shares to its intra-day record high. The index hit 7,129.21 –  up 0.45 per cent or 31.68 points. 

Its previous intra-day record was 7,122.74 which it reached on 27 April 2015.

The index has been boosted by retailers such as Next and Marks & Spencer, up 4.2 per cent and 3.1 per cent, respectively.

The smaller FTSE 250 index, or the 250 biggest companies in the UK, has gained 0.7 per cent – close to the record high struck last week.

How the pound has struggled since Brexit

The decline of the pound has boosted the FTSE 100 as many companies make a significant proportion of their profits abroad. 

However, the FTSE failed to hit a new closing high as a late afternoon selloff sent the index down by 0.38 per cent to 7070 points.

Conner Campbell of SpreadEx said that Brexit worries have pushed shares prices down.

The sight of top bankers from Citi and Morgan Stanley warning they could quit the City next year has also dented confidence.

Campbell said: "A lunchtime surge saw the FTSE smash through to 7129; now it’s back hovering below 7100, that midday burst of energy proving to be brief."

"Perhaps reports that both Citi and Morgan Stanley have stated they will leave London if Britain appears to be heading for a hard Brexit have weighed on investors’ appetite for the UK index; perhaps it was a bout of profit-taking. Either way the FTSE couldn’t hold onto its highs for long."

Sterling was down 0.61 per cent at $1.2290 against the dollar in early trading on Tuesday - this would be a new 31-year low for the currency, if you ignored the flash crash that sent sterling tumbling by more than 6 per cent on Friday.

It was still trading below $1.23 at 1.22208 at 5pm.

Sterling has now fallen about 18 per cent against the dollar since the referendum, to lows not seen since 1985.

The currency has been this year’s worst performer among 32 major currencies tracked by Bloomberg.

Sterling has been under pressure for more than a week. At the Conservative Party conference, Prime minister Theresa May hinted she would opt for a “hard Brexit” settlement that sacrifices access to the single market and prioritises stricter immigration controls.

Brexit Secretary David Davis dismissed calls for him and his fellow ministers to be “careful with their words” to prevent further volatility and sharp declines.

Bank of England policymaker Michael Saunders said on Tuesday he would not be surprised if the pound fell further.

HSBC analysts predicted the pound will fall to $1.10 against the dollar and hit parity against the euro by the end of 2017.