London Report: FTSE hit by fears fall in euro will hurt UK exports

THE benchmark equity index fell for the third straight session yesterday, which traders attributed to a rise in sterling against the euro that could hit UK exporters.

The blue-chip FTSE 100 index closed down by 0.7 per cent, or 44.47 points, to 6,697.22 points – underperforming other major European stock markets such as Germany’s DAX, which rose to reach record highs.

The FTSE 100 initially rose after the European Central Bank cut its main interest rate to a record low of 0.25 per cent.

However, the index then fell back into negative territory. The pound rose against the euro after the European currency weakened in the wake of the ECB cut, while the US dollar also strengthened against the euro.

The Bank of England earlier kept its key interest rate unchanged at a record low of 0.5 per cent, and sterling rose to a 10-month high against the euro yesterday.

“The UK is in a different cycle. In Britain, the talk is actually moving to eventually raising rates, so many people are buying Europe today and selling the UK,” said Darren Courtney-Cook, head of trading at Central Markets Investment Management.

Terry Torrison, managing director at Monaco-based McLaren Securities, added that the rise in the dollar – used to price commodities – was hurting mining stocks because it could dampen demand from buyers outside the United States.

The FTSE 350 Mining Index fell 1.3 per cent, weighing on the broader FTSE 100 index since mining stocks account for about a tenth of the FTSE 100.

“The dollar rally is in turn pressuring the miners in the FTSE who are again pretty high weighters in the index,” said Torrison.

Some traders felt the FTSE would stall in November after reaching a five-month high of 6,819.86 points in late October.

However, they added any November pullback would then be followed by a rally in December through to the end of the year, with the FTSE still up some 14 per cent since the start of 2013.

“There’s still plenty of flows coming into the market, from the US into Europe and from bonds into equities,” said Chris White, head of UK equities at Premier Asset Management.