FTSE 100 Gets A Boost Amidst Growth And Political Worries

On Wednesday, the stock markets in the United Kingdom bounced back from a sharp sell-off. This was because the FTSE 100 got a boost from a weaker British pound, as the economic concerns were compounded by a political crisis in the government of Boris Johnson.

FTSE 100 rises

There was a 1.2% rise in the FTSE 100, as it made a recovery from the worst trading session it has had in the last three weeks. The index had gotten a boost because of its exporter-heavy nature since companies like Unilever, Diageo, and AstraZeneca earn in dollars.

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As far as the British currency is concerned, it fell to a low against the US dollar, which was last seen two years ago. This was after the resignation of key cabinet members, lawmakers, and ministers of the British government, while Boris Johnson continued to hold onto his position.

The export-heavy FTSE 100 has done well this year, even though inflation has surged and there are increasing worries of an economic recession. This is primarily because of a weaker sterling. Market analysts said that the pound was under pressure because of the political turmoil. Markets are wondering how long Johnson will be able to cling to his government.

The fact that the blue-chip FTSE 100 index is mostly international, the stocks are able to do well every time the pound goes down. However, there is still a bearish outlook associated with UK equities because of the double whammy of both a political and economic crisis.

FTSE 250 rises

It was not just the international index that gained, but the domestically focused one also advanced. The FTSE 250 rose by 1.5% after it had fallen to a fresh low in the last session, which had been seen in 2020. The mid-cap index has taken a beating because of the worries of an economic recession. It has plunged by 21% this year, with the Bank of England attempting to tame inflation that is expected to enter the double digits in October.

Huw Pill, the chief economist of the Bank of England (BoE) said that he was prepared to vote for a bigger vote hike than just 25 basis points if required by the economic situation. So far, the BoE has hiked rates five times since December 2021 and they have stuck to the 25 basis points hike.

Individual shares

There was a decline in shares of British banks, such as Barclays, Standard Chartered, and HSBC, between 0.4% and 2.3%. This was after the Bank of England issued a warning about the gloomy economic outlook and told British banks to increase their capital buffers.

A 20.6% rise in Trainline was also recorded after the ticketing group disclosed that it had made a faster recovery in terms of passengers traveling to Europe. This drove the company to forecast a better annual outlook. A 5.1% increase in Abrdn was also seen, as the asset manager announced a new share buyback program of about 300 million pounds.

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