Reasons to be cheerful…..

ALL-TIME HIGH: The FTSE 100 just hit its highest level ever!

The FTSE 100 — Britain’s benchmark share index — just hit the highest level in history, smashing its previous record, set in April 2015.

Around 12:05 p.m. BST (7:05 a.m. ET) the index hit 7,128 points, surpassing its previous intraday high of 7,123. That’s an increase of just more than 0.4% so far on the day.

Here’s the chart:

ftse 100 all time high *

Gains are being led by Whitbread, the retail company which owns Costa Coffee and several other major names, and high street stalwart Next. Next is higher by more than 4.2%, while Whitbread is up 3.7%. Retailers are getting a boost on the day thanks to some better than expected data from the British Retail Consortium.

The main catalyst of the gains across the whole index is another weak day for the pound, which has fallen 0.85% on the day so far,  after a report that a so-called “hard Brexit” could cost the Treasury £66 billion per year.  If you discount Thursday night’s “flash crash” — which was reportedly so bad because of low liquidity — there is still a clear downward trend for sterling, with no clear sign of the bottom.

To the uninitiated, a weaker pound might seem like bad news for UK stocks, however around 70% of the revenue of the companies that make up the FTSE 100 is derived from abroad, meaning that when sterling is weak, they make more money. That is because the index is stuffed full of mining companies, oil firms, and pharmaceutical giants who use the UK as a base, but tend to denominate their assets in dollars.

Essentially, when the pound does badly, the FTSE does well, as evidenced by the 19% gain in the index since it crashed on the day after Britain voted to leave the EU.

ftse 100 since brexit

It is also worth noting that when measured in dollar terms, the FTSE is substantially below its all-time high, and actually remains well below its pre-referendum level, as this chart from Sky News last week shows:

ftse 100 dollar denominated Sky News

However, if the FTSE maintains its current level, it will hit an all-time closing high in pure terms, surpassing the 7,103 close of April 27 2015, the same day as the previous intraday high.

Elsewhere in Europe, gains are of a similar level to the FTSE, with major bourses generally climbing between 0.3-0.5% on the day. Here’s the scoreboard:

Screen Shot 2016 10 11 at 12.24.31


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