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
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

Recruitment Genius: Warehouse Operative

£14000 - £15000 per annum: Recruitment Genius: An opportunity has arisen for a...

Ashdown Group: Senior .Net Developer - Kingston Upon Thames, Surrey

£70000 - £80000 per annum: Ashdown Group: A long-established, technology rich ...

Recruitment Genius: Digital Project Manager

£25000 - £40000 per annum: Recruitment Genius: This growing digital marketing ...

Recruitment Genius: Electrical Quality Supervisor

£28000 per annum: Recruitment Genius: The Midland's leading Solar Panels provi...

Day In a Page

Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

Homeless Veterans campaign

Donations hit record-breaking £1m target after huge gift from Lloyds Bank
Flight MH370 a year on: Lost without a trace – but the search goes on

Lost without a trace

But, a year on, the search continues for Flight MH370
Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

Germany's spy HQ springs a leak

Thieves break into new €1.5bn complex... to steal taps
International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

Whirlwind wit of Simone de Beauvoir

Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

Confessions of a planespotter

With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
Russia's gulag museum 'makes no mention' of Stalin's atrocities

Russia's gulag museum

Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

The big fresh food con

Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

Virginia Ironside was my landlady

Tim Willis reveals what it's like to live with an agony aunt on call 24/7
Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

Paris Fashion Week 2015

The wit and wisdom of Manish Arora's exercise in high camp
8 best workout DVDs

8 best workout DVDs

If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

Paul Scholes column

I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

From the Azteca to Vicarage Road with a million followers

Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

Khan ready to meet winner of Mayweather v Pacquiao

The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable