The FTSE 100 enjoyed improving sentiment on Monday as the UK neared a deal with the EU over the Irish border and the pound avoided capping the FTSE’s gains with only a minor move against the dollar.
“The FTSE 100 made a strong start to the week as investors shrugged off the inflation and interest rate concerns which bedevilled markets last week,” said AJ Bell investment director Russ Mould.
“This went against the prevailing mood in Asia which followed in the footsteps of the US in seeing material declines after a key inflation reading closely watched by the US Federal Reserve came in ahead of expectations.”
While interest rates and the dynamics of overseas economies dictated trade last week, the focus was firmly back on the UK economy and relations with the EU on Monday.
The prospect of a greater cooperation with the EU helped lifted sentiment, but it was the move – or the lack of a move – in the pound that helped the FTSE 100 index rally.
Good news for the UK economy and a rising pound tends to curtail upside in the FTSE 100 and the absence of a strong sterling rally against the dollar provided support for London’s overseas earners.
“With no big fire lit under sterling and recent weakness persisting, it has given support to the internationally focused FTSE 100, which benefits from a weaker pound given that it boosts earnings made overseas in dollars,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
Rolls Royce
Rolls Royce was the FTSE 100 top gainer as it continued the rally sparked by last week’s upbeat results. Rolls Royce is now up 52% in 2023 – no other FTSE 100 stock has performed better.
AB Foods was among the gainers after the Primark-owner said sales had increased 20% in their first half. AB Foods warned input cost inflation would mean operating profit are likely to be flat in 2023, although their outlook had slightly improved.
“Primark owner Associated British Foods painted a positive picture with its latest trading update. There’s good news on both demand and costs which has helped the company lift its guidance,” said Russ Mould.
“Resilient spending at Primark could well reflect the company’s budget credentials, people trading down from more expensive chains and brands. Particularly in areas like kids’ clothes where growth spurts mean clothes have a relatively short shelf life and therefore price rather than quality is a big driver of purchases.