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FTSE 100 heads towards new record as pound continues to slump

Discussion in 'Market News' started by Lily, Oct 7, 2016.

  1. Lily

    Lily Forum Member

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    Exporters and overseas earnings benefitting from weak pound push index higher

    Leading shares are heading back towards a new peak, as the continuing slump in the pound pushes exporters and overseas earners higher.

    The flash crash in sterling in the early hours of trading may have been an anomaly but the pound remains under pressure on fears of a hard Brexit, especially after tough talking from German chancellor Angela Merkel and French president François Hollande. Last weekend’s comments from UK prime minister Theresa May suggesting the focus in Brexit talks would be immigration controls rather than remaining in the single market started the rot in the pound.

    We upgraded Fidessa to neutral in July, still cautious on its end market, investment banking, but arguing that its share price had corrected sufficiently post the UK referendum. We also noted that the sharp depreciation in sterling would benefit Fidessa’s bottom line and make it cheaper in non-sterling terms (Fidessa had been the subject of media reports as a takeover target earlier in the year; e.g. FT on 9th March). Since, however, although the pound has fallen further, the re-rating has overshot, we think, and we would advise investors in Fidessa to take advantage of the corresponding rally in its share price to sell the shares at the present current level.

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