Following Prime Minister Theresa May’s speech on Tuesday signalling a “hard” Brexit, the FTSE 100 index hit a record high on Monday after sterling fell to a three-month low.
The FTSE 100 has edged up for a consecutive 14 days in a remarkable run since the start of 2017.
Since the sterling dropped by 1.5 percent following May’s signal of approaching a “hard Brexit”, the FTSE 100 has benefitted as it means overseas profits for multinational companies listed in London are worth more when converted back into sterling.
The top fallers were Barclays (LON:BARC) and Royal Bank of Scotland (LON:RBS), who both fell by more than two percent.
Dafydd Davies, a partner at Charles Hanover Investments, said: “Having access to the single market is key for (the banks), or indeed if they can’t have access, then what the particular requirements of the passporting might be for them to be able to still do business across Europe,”
“If it is a genuinely hard Brexit and then they have to look at relocation costs, that could be quite substantial for them. However, at the moment it’s very much a wait-and-see situation” he added.
James Illsley, an equity fund manager at JP Morgan Asset Management believes there is reason for the FTSE 100 to continue to rise throughout 2017.
“Commodities have seen a sharp recovery in their pricing and prospects, with this sector accounting for nearly a quarter of the FTSE100,”
“When we look at the UK, the economic data has surprised to the upside with its resilience since the vote [and] the domestic economy still continues to do well in general,” he said.
“The question, of course, is how much the currency can fall,” he says. “The more the pound falls, the more the index could overshoot our forecast” he added, referring to the potential for surprise.
Among blue chips, mining companies such as Anglo American (LON:AAL), BHP Billiton (NYSE:BHP) and Glencore (LON:GLEN) were all up between 0.8 and 1.9 percent.