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London open: Stocks rally as sterling drops on Saunders comments
London stocks rose in early trade on Friday as the pound lost ground following dovish comments from Bank of England policymaker Michael Saunders.
At 0830 BST, the FTSE 100 was up 0.8% at 7,411.74, while the pound was down 0.4% against the dollar at 1.2283 and 0.3% lower versus the euro at 1.1251 as Saunders said an interest rate cut may be needed even if a Brexit deal is agreed.
Saunders pointed out that uncertainty would persist even if a no-deal scenario was avoided. “In this case, it might well be appropriate to maintain a highly accommodative monetary policy stance for an extended period and perhaps to loosen policy at some stage, especially if global growth remains disappointing,” he said in a speech in Barnsley.
Spreadex analyst Connor Campbell said: “The primary reason for the index’s buoyancy was its schadenfreude at the state of the pound.
“Bank of England policymaker Michael Saunders’ claim that the Brexit uncertainty may force a rate cut hasn’t help the pound out, adding to the headache caused by the increasingly loud drum of those seeking a general election.”
Talks between the UK and the EU were set to resume later in the day as Brexit Secretary Stephen Barclay heads to Brussels to meet EU Brexit negotiator Michel Barnier.
Investors were also mulling the latest survey from GfK, which showed that consumer confidence improved a touch in September although sentiment remained negative overall amid ongoing uncertainty about Brexit.
GfK’s long-running consumer confidence index rose to -12 from -14 in August, coming in ahead of expectations for no change.
Joe Staton, client strategy director at GfK, said: “More mixed signals this month as consumers continue to feel less than positive about the state of their personal finances and the general economy. Yes, all sub measures are higher, but they are anaemic in the case of our purchase intentions and how we view our wallets, while the results on the wider economy are still depressed.
“Since the Brexit referendum we have witnessed a long succession of negative Overall Index scores with the overall trend downwards. This month, British consumers appear to be treading water during this wait-and-see run up to October 31st.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said consumer sentiment is “continuing to hold up well” despite the chaos in Westminster and lingering risk of a no-deal Brexit.
In equity markets, Pennon rose after saying it is on track to meet full-year management expectations and announcing a full review of its strategic focus, growth options and capital allocation policy.
James Fisher and Sons gained as it won a multi-million pound contract to design and build submarine rescue equipment, as part of a comprehensive submarine rescue capability being provided to China Shipbuilding & Offshore International Co.
Grainger ticked a little higher as the UK’s largest listed provider of private rental housing reported overall rental growth of 3.4% in the 11 months to August 31.
Tobacco company Imperial Brands and education publisher Pearson were both on the back foot again following profit warnings on Thursday, along with cruise operator Carnival.
Housebuilders Taylor Wimpey and Barratt Developments were in the red after downgrades to ‘hold’ at Jefferies, but Persimmon was boosted by an upgrade to ‘buy’.
Ashmore rallied on the back of an upgrade to ‘overweight’ at Morgan Stanley.
