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Britain’s FTSE outperforms Europe as weaker dollar lifts commodities companies

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UK shares traded lower on Thursday but outperformed their European counterparts, as miners were boosted by a weaker dollar followed by the U.S. Federal Reserve’s dovish decision to hold interest rates steady.

The Fed also indicated on Wednesday that moderate U.S. economic growth and “strong job gains” would allow it to tighten policy this year, noting however that the U.S. continues to face risks from an uncertain global economy.

The statement was followed by fall in dollar against sterling and the euro, crimping appetite for British and euro zone shares as exporters were hit and equities became more expensive to dollar investors.

However, the fall in the dollar pushed shares in British commodities stocks higher as dollar-priced crude oil and metals became cheaper for other currency holders.

The FTSE 100 index fell 0.3 per cent to 6,157.42 points by 1243 GMT, outperforming euro zone shares which witnessed steeper falls.

Market analyst at CMC Markets, Jasper Lawler said, “A more dovish Fed could be a problem for the shares of Eurozone countries since it unwinds some of the export advantage that came about because of accommodative ECB policies”.

“UK stocks are outperforming those in Europe thanks to a gain in resource shares which have benefited from a rally in dollar-denominated commodities following the Fed meeting.”

Miners were the top sectoral gainers on the blue-chip index, with the FTSE 350 Mining index jumping 6.3 per cent as the price of copper hit a four-month high.

South African authorities approved Sibanye Gold’s acquisition of mines belonging to its platinum -division Anglo American Platinum which saw Anglo American as the top riser, leaping more than 8 per cent.

Other miners – Glencore, Antofagasta, BHP Billiton and Rio Tinto all rallied between 4.2 per cent and 8.3 per cent.

The oil and gas sector also saw a rise, tracking oil price, which continued its strong gains after the world’s biggest suppliers firmed up plans to meet for charting out an output freeze.

Shares in British American Tobacco and Hammerson fell and went ex-dividend along with other shares. Ex-dividend shares took around 8 points off the FTSE 100.

Decision by the Bank of England to keep rates steady failed to move the index, with policymakers adding that sterling had been dealt a big hit by uncertainty in the run-up to the referendum on EU membership.

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Paul

The author Paul