London stocks shine as sterling tumbles

The London stock exchange was the standout performer in Europe

London (AFP) – London stocks outperformed their peers on Wednesday, buoyed by weakness in the pound after British inflation dived to a one-year low.

Other key markets had a mostly lacklustre day, traders reported, as investors were happy to take a step back from near-constant recent worries about global trade and tensions over Syria.

“UK stocks jumped off the back of a weaker British pound but nothing really captured the imagination of European investors,” said Jasper Lawler, head of research at LCG.

Sterling’s downturn marked a sharp reversal from the currency’s post-Brexit vote highs seen early in the week and followed much weaker than expected inflation data for March.

Annual British inflation slowed unexpectedly to 2.5 percent in March from 2.7 percent in February, prompting market talk that the case for early Bank of England interest rate rises may be starting to fall apart.

The news divided opinion about the chances of a rate hike in May, which had previously been considered a near-certainty.

Pundits said the data also threw into doubt the course of the Bank of England’s monetary policy for the rest of the year.

But sterling’s drop was a boon for stocks, as the weaker currency  enhances the earnings of multi-nationals trading on the FTSE.

– Improving mood –

“The FTSE 100 has gone from the back of the pack to the market leader, as a sharp deterioration in UK inflation has driven the pound sharply lower, ramping up FTSE gains,” said IG analyst Joshua Mahony.

In company news, British retail property giant Hammerson scrapped a £3.4-billion ($4.9-billion, 3.9-billion-euro) takeover of rival Intu that would have created a pan-European shopping mall giant, citing a weak UK consumer market.

Investors welcomed Hammerson’s decision, with the group’s share price jumping sharply, while that of Intu slumped.

Wall Street stocks, meanwhile, were a touch firmer approaching midday in New York.

“The global mood starts to improve,” said CMC Markets analyst David Madden. The Syrian conflict and global trade uncertainty were now “on hold” he said, providing markets with fresh upside, and the chance to focus on corporate earnings.

Oil prices had a strong day, with both key crude contracts posting gains well above a dollar per barrel.

A surprise fall in weekly US oil stocks underpinned the market, as did reports that OPEC kingpin Saudi Arabia is aiming for the oil price to return to around $100, dealers said.

 – Key figures around 1540 GMT – 

New York – Dow: UP 0.1 percent at 24,813.96 points

London – FTSE 100: UP 1.3 percent at 7,317.34 (close) 

Frankfurt – DAX 30: UP 0.04 percent at 12,590.83 (close)

Paris – CAC 40: UP 0.5 percent at 5,380.17 (close)

EURO STOXX 50: UP 0.4 percent at 3,492.62

Tokyo – Nikkei 225: UP 1.4 percent at 22,158.20 (close)

Hong Kong – Hang Seng: UP 0.7 percent at 30,284.25 (close)

Shanghai – Composite: UP 0.8 percent at 3,091.40 (close)

Euro/dollar: UP at $1.2376 from $1.2370 at 2100 GMT

Dollar/yen: UP at 107.26 yen from 107.00

Pound/dollar: DOWN at $1.4229 from $1.4288

Oil – Brent North Sea: UP $1.36 at $72.94 per barrel

Oil – West Texas Intermediate: UP $1.46 at $67.98