The Sterling Crisis: Exhausting week of confusion ends on high note: Record trading

FORTUNES were made and lost last week as the London stock market first plunged, then soared, see-sawed and soared again.

It ended on a high note, with the market rising nearly 200 points in two days on record trading levels.

Dealers went home tired and happy, wondering what lay in store for them next week after the French referendum on the Maastricht treaty.

A few will return to their desks on Sunday evening in time for the referendum results but more will turn up early - which in the modern City of London means 6.15am - on Monday.

Fund managers - the men and women who invest billions on behalf of pension funds, insurance companies and charities - were as confused by last week's gyrations as anyone.

One seasoned professional said: 'After that experience, when we did not know what was happening from hour-to-hour, how can you expect me to predict what will happen two days from now?'

The gains were solid enough. Shares in ICI, which opened the week at pounds 10.68 and sank to pounds 10.54 on Wednesday, were changing hands by the end of the week at pounds 11.37, a gain of 6.5 per cent since the previous Friday.

Hanson, which at one point last year looked as if it might bid for the chemicals giant, saw its shares gain 14.4 per cent to 226.5p over the week.

Both companies earn a large slice of their profits overseas and stand to benefit as sterling declines. Other international earners to benefit from the euphoria at sterling's decline include Glaxo, the drugs company, Tomkins, which owns the Smith & Wesson handgun firm, and exporters such as British Aerospace.

Lord Forte became pounds 4.55m richer as the value of his hotels company jumped. But David Sainsbury saw the value of his 20 per cent stake in the supermarket company fall by pounds 5.2m as investors switched their allegiance to companies which export and those with overseas businesses.

Stock market investors exhibited an uncanny gift of foresight dueing the week.

On Tuesday, as the pound slumped they correctly guessed that the government would increase interest rates. Dealers reduced their prices accordingly.

They were proved right the next morning but to no avail. The pound continued weak despite a threatened hike to 15 per cent.

The dealers then guessed that the government would give up the fight and devalue the pound. That duly came true after the stock market had closed on Wednesday, prompting huge buying on Thursday, the busiest day since the current trading system was introduced in 1986. Investors were further encouraged by the cut in interest rates to 10 per cent.

They are now predicting a further cut to 8 per cent. Whether their record remains in tact remains to be seen next week.

The threat of higher inflation holds few fears for stock market investors as share prices traditionally offer an excllent hedge against rising retail prices.

Pension funds have 80 per cent of their assets in shares so are keen to see further rises. In many ways they were guilty of talking their own book when they went home predicting further gains next week.

(Graph omitted)

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Ashdown Group: Senior Accounts Assistant - Accounts Payable - St. Albans

£26000 - £28000 per annum + benefits : Ashdown Group: Senior Accounts Assistan...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Recruitment Genius: Installation and Service / Security Engineer

£22000 - £40000 per annum: Recruitment Genius: This company is part of a Group...

Recruitment Genius: Service Charge Accounts Assistant

£16000 - £18000 per annum: Recruitment Genius: Are you a a young, dynamic pers...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions