By Connor Campbell, Financial Analyst for Spreadex.com
The FTSE found itself caught between sterling’s Fed-inspired strength and a decent set of corporate earnings this Thursday.
Despite the Federal Reserve stating that it would start shrinking its balance sheet from September, ostensibly a dollar-positive move, investors instead focused on the central bank’s grumblings about weak inflation. Given that the previous month’s meeting minutes had highlighted the CPI-performance as a key issue for more than a few Fed members this was taken as a rate hike-delaying comment, doing further damage to an already gaunt greenback.
The news helped cable briefly surge above $1.315 for the first time since September last year, before settling slightly below that landmark level. This led to a muted start from the FTSE, though the weight of the pound’s gains is being somewhat negated by a largely positive morning for the index’s reporting companies.
Guinness-owner Diageo (LON:DGE) rose 5% as it revealed a £1.5 billion share buyback programme; Anglo American (LON:AAL) jumped 3.3% after restarting its dividend 6 months ahead of schedule; and Rentokil Initial (LON:RTO) was up just shy of 4% thanks to an absurd 637% increase in pre-tax profit. There were also positive statements from Shell (LON:RDSa), Relx (LON:REL), Schroders (LON:SDR), Smith & Nephew (LON:SN) and a currency tailwinds-boosted British American Tobacco (LON:BATS).
It wasn’t all good news, however. Even though it posted its best half year profit in 8 years, Lloyds (LON:LLOY) fell around 1.5% after revealing it had to set aside another £700 billion to cover the latest round of PPI claims. AstraZeneca (LON:AZN), meanwhile, dove off a cliff, plunging a stomach-churning 16% following the failure of a key lung cancer trial.
Like the pound, the euro has greatly benefited from the dollar’s sour summer, hitting a fresh 2 and a half year high in the aftermath of the Fed announcement, only to dip back under $1.175. The currency’s muscular showing continues to be a problem for the DAX, which slipped 0.2%, but less so for the CAC, the French index rising 0.5%.
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