A stronger pound sent the FTSE 100 lower on Tuesday as the Brexit deal on Northern Ireland helped lift sterling against the dollar.
The breakthrough agreement saw GBP/USD rise 0.5% to 1.2131 and FTSE 100 slip back beneath 7,900.
While the agreement is good news for the UK economy and UK companies, it is not favourable for London’s leading index packed full of companies earning their revenue overseas. The FTSE 100’s overseas earners suffer in periods of sterling strength, and are supported by a weaker pound.
The FTSE 100’s inverse relationship with the pound has become prevalent in periods of market volatility related to Brexit negotiations ever since the vote to leave in 2016. Today’s deal between the UK and EU was no exception.
FTSE 100 sectors exposed to the UK including financials, banks and housebuilders rallied on the agreement, but their support was not enough to offset losses in overseas earners. Kingfisher was a notable riser, gaining 4%.
Heavyweights including AstraZeneca, Diageo, Unilever and British American Tobacco were all weaker on the day and dragged on the index.
Ocado
A disappointing update from Ocado meant the premium online retailer was the FTSE 100’s worst performer, falling as much as 10%.
Ocado’s 2022 revenue edged fractionally higher but the cost of living crisis was blamed for lower average basket sizes and there was little improvement in their solutions business EBITDA.
“Ocado: so much promise and so little joy. Three years ago, it was on the cusp on a significant shift in consumer behaviour. The pandemic forced people to buy their groceries online, meaning any company that didn’t have a robust set-up to pack and deliver food and drink to households had to think fast to gain this capability,” said Russ Mould, investment director at AJ Bell.
“Ocado had the best moment in its existence to sell its technology platform to grocers around the world. Sadly, the deals have been few and far between, leaving investors wondering when it will ever make a sustainable profit.”
abrdn
Investors were pleased with abrdn’s robust 2022 full report and confirmation their strategic plan was beginning to bear fruit. A focus on their Adviser and Personal business, which includes the acquisition of Interactive Investor, helped offset weaker revenue from their Investments unit due to poor market conditions.
“We are building a stronger abrdn. As we exit year two of our three-year strategic plan, the structure of our group is now broadly set. We are increasingly well positioned for growth,” said Stephen Bird, Chief Executive Officer of abrdn.
“In one of the toughest investing years in living memory, the resilience we have created in our business model helped us to deliver adjusted operating profit of £263m.”
abrdn shares were 4% higher at the time of writing.