The pound has depreciated further this morning with only the Antipodean currencies performing worse in the G10 space. The FTSE 100 is edging higher with a single-digit gain after an impressive rise on Tuesday.
Sterling extends recent decline
The pound has seen further weakness so far today, falling below the 1.28 handle against the US dollar whilst the EURGBP has made another pusher higher above 0.92. The EURGBP exchange rate is now more than 20% higher than at the time of the Brexit vote and calls for a move to parity are gaining credence with every passing day. The release this morning of the latest PMI readings from Europe were fairly mixed with the manufacturing print of 57.4 exceeding consensus forecasts, but the services equivalent was a slight disappointment at 54.9. In comparison to the UK though, today’s releases from the continent remain above their respective readings on these shores and further suggest that the level of confidence and future expectations for growth amongst business leaders in the Eurozone is significantly above those seen in Britain.
Provident crash has little precedent
The big story on the London Stock Exchange on Tuesday was the precipitous drop seen in the share price of Provident Financial (LON:PFG) after an unscheduled trading update wreaked havoc in the markets. Even with the dust settling somewhat the scope of yesterday’s decline in Provident is scarcely believable with the drop in percentage terms having very little by the way of precedent. The collapse for a FTSE 100 firm rivals that of the 67% plunge seen in RBS (LON:RBS) stock on its worst day in 2009 and you have to go back to 2003 when news of an accounting scandal at Ashtead (LON:AHT) saw a comparative decline. In light of the underlying reasons behind these two prior crashes, there is a case to be made for the panic-selling seen yesterday morning to be deemed excessive.
Star fund manager defends his position
Neil Woodford, a fund manager who has earned a reputation as one of the industry’s best, is the most prominent figure in this camp stating his view that Provident shares started the day “undervalued” and became “even more so” as a result of Tuesday’s trade. In light of these comments it appears that Mr. Woodford, who’s fund was one of the largest holders of Provident stock at the end of July when regulatory filings were last made, is sticking by his guns on this call. Whether investors in his fund share his steadfast belief in the face of adversity remains to be seen and whilst he has built up a widely-admired track record over his three decades in fund management, should yesterday’s sell-off turn out to not be an overreaction then his reputation will have a notable black mark against it going forward.