Oct 4, 2016
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European Stocks Rise as Britain’s Pound Plunges to Three-Decade Low

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European equity benchmarks were higher on Tuesday morning as the UK's benchmark FTSE 100 index soared for a second day in a row driven by a plummeting pound, which benefits exporters.
The UK currency fell below its low reached following the June vote to leave the European Union (EU). It touched as low as $1.2770 on Tuesday morning, its weakest level since 1985. The currency resumed its downtrend after Prime Minister Theresa May on Sunday set a deadline for triggering the two-year negotiation process on the terms of the country's departure from the bloc.
“The British pound is under constant pressure and the bias remains skewed towards the downside,” Naeem Aslam, chief market analyst at Think Markets UK, said by e-mail. “The UK government does not appear to have any plan about how they are going to deal with the Brexit negotiations, and the lack of clarity on this front is haunting the currency. Lower sterling is surely a positive sign for the FTSE 100 index and this is why w..

European equity benchmarks were higher on Tuesday morning as the UK’s benchmark FTSE 100 index soared for a second day in a row driven by a plummeting pound, which benefits exporters.

The UK currency fell below its low reached following the June vote to leave the European Union (EU). It touched as low as $1.2770 on Tuesday morning, its weakest level since 1985. The currency resumed its downtrend after Prime Minister Theresa May on Sunday set a deadline for triggering the two-year negotiation process on the terms of the country’s departure from the bloc.

“The British pound is under constant pressure and the bias remains skewed towards the downside,” Naeem Aslam, chief market analyst at Think Markets UK, said by e-mail. “The UK government does not appear to have any plan about how they are going to deal with the Brexit negotiations, and the lack of clarity on this front is haunting the currency. Lower sterling is surely a positive sign for the FTSE 100 index and this is why we have seen some serious gains for the index since the Brexit vote.”

Aslam predicts the currency may reach as low as $1.25 versus the US currency.

In equities, Wolseley (WOS.L,) a UK heating and plumbing product distributor, gained 2.5% and engineering company Rolls Royce (RR.L) advanced 2.6% in London. Education group Pearson (PSON.L) gained 5%. Pharmaceutical major AstraZeneca dropped 0.9% after the company said its Brilinta drug for arterial disease failed a large-scale trial.

Deutsche Bank ( DB ) was 3% higher after HSBC analysts said that fears over the bank’s solvency are overdone, even as it lowered its price target for the shares, according to Reuters. The German lender’s shares tumbled last week on concern it would struggle to pay a proposed settlement by US regulators and recovered on Friday after reports that the fines may be less than expected.

French luxury goods company LVMH Moet Hennessy Louis Vuitton (MC.PA) rose 1.3% after it said it is buying an 80% stake in German high-tech luggage maker Rimowa for 640 million euros ($716 million) according to news reports.

Peugeot (UG.PA) rose 2.3% in Paris and BMW (BMW.DE) gained 2.3% in Frankfurt. Vivendi (VIV.PA) gained 2.2% in Paris after Deutsche Bank raised its target price for the French media conglomerate. Airline operator Lufthansa (LHA.DE) bucked the trend falling more than 3% in Frankfurt.

The pan-European STOXX 600 index rose 0.6% and the euro-region blue-chip STOXX 50 index gained 0.7%. The FTSE 100 in London rose 1% and the DAX index aded 0.6% as traders returned from a German public holiday. The CAC 40 index in Paris rose 0.8%.

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