Home ForexFTSE Pound-powered FTSE 100 rally not a joy for U.S. traders

Pound-powered FTSE 100 rally not a joy for U.S. traders

by Paul

As prospects of Brexit firm up, a fresh weakening in the pound is pushing the FTSE 100 Index of U.K. megacaps close to a record. Not that foreign investors, who own more than half the nation’s equities, are rejoicing.

While the British equity benchmark has surged 12 percent this year in local currency, it has declined more than 2 percent in dollar terms, the biggest underperformance since the global financial crisis. Exporters advanced on Monday as the pound tumbled after Prime Minister Theresa May said she’ll start the process of withdrawing the U.K. from the European Union by March 2017. On Tuesday, FTSE 100 futures traded higher at 7:52 a.m. in London as the currency sank to its weakest since 1985.

Local investors have seen the value of their holdings increase as companies including drug maker AstraZeneca Plc and whiskey company Diageo Plc, which get most of their revenue outside the U.K., rallied after June’s secession vote sent the pound tumbling. Remove the currency halo, and the FTSE 100 is still below the level it was at before the decision. That’s bad news for overseas investors, if they haven’t hedged to account for the sterling effect. North America accounts for 46 percent of all foreign holdings, according to the latest government report published last September.

Risk Warning:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Related News

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More