The FTSE stormed higher on Thursday as investors digested mixed earnings and thanks to the weaker pound.
Pound Below $1.29 On Brexit Nerves
Pound trades were starting to show their nerves on Thursday, awaiting news from the EU over what extension, if any, has been granted. With no news expected until Friday or even Monday, pound investor nerves could be frayed further yet.
The length of the extension is important because it will help determine, what the next steps are in the Brexit drama. A short extension wipes out the possibility of an election. A longer three-month extension opens the door to a snap election or the PM slowly pushing his Brexit deal through. For the pound, the prospect of a snap election and further political uncertainty very unappealing. Given the selloff in the pound this afternoon, investors are growing increasingly certain this might be the only way out of Brexit gridlock.
Dollar Rallies
After a weak start to trading, the US dollar jumped higher. Finally, investors had some positive US data to sink their teeth into. US manufacturing PMI unexpectedly increased to 51.5 in October, up from 51.1. Meanwhile service sector PMI printed in line with expectations. The big relief here is that any slump in manufacturing hasn’t spilled over into the service sector yet. And secondly that manufacturing appears to be rebounding.
RBS (LON:RBS) Drops On Gloomy Update
RBS was a notable decliner after announcing a loss across the third quarter, its first quarterly loss since Q4 2017. The amount set aside for PPI claims was at the top end of expectations, a hefty £900 million. This takes total PPI compensation claims for the bank to an eye watering £6.2 billion. If PPI had been the only issue, the markets would have been able to cope. The deadline was 29th August for claims so this theoretically should be the final quarter affected. However, there were other area of weakness for which investors are less forgiving; performance at the investment arm NatWest Markets was particularly disappointing. New boss Alison Rose will certainly have her work cut out when she starts in November.
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