The U.K market FTSE-100 is trading near record high, but unfortunately or foreign investors, the sharp drop in the British pound would have erased all of their profits, and then some. When a country’s largest companies earn most of their income abroad, those earnings are amplified when translated back into a weaker home currency. FTSE members earn only 28.5% of their revenue domestically. The FTSE 100 ( 0.96%) the U.K.’s benchmark stock index, touched a record high of 7,128 on Tuesday, and is up 11.3% in the year to date, helped by a steep drop in the pound, which continues to trade near 31-year lows.
a 2.64% pullback from couple of past trading days as we can see on the graphic above. We’re looking at this as a short-term pullback after some of the big moves we’ve seen . . That massive gulf is due to the selloff in the pound. The U.K. currency has shed more than 17% of its value relative to the dollar since the beginning of the year. Most of that decline occurred after the U.K. voted to leave the European Union in a June 23 referendum. The selloff in U.K. government bonds gathered pace as prospects of faster inflation gave investors another reason to pull back from a market hurt by the mounting economic and political cost of Brexit.
To me the structural story has not changed — Investors are talking about the debt overhang, demographics, productivity, excess savings – all the factors for the bond market. he pound remained near a three-decade low against the dollar, closing at $1.2181. Bank of England Deputy Governor Ben Broadbent said the currency’s slump since the U.K.’s vote to quit the European Union will help the economy overcome shocks from the decision.
J. Mason ♦