FTSE 100 Climbs Higher on Brexit Fears

The FTSE 100 has hit a new intraday high this morning, pushed on by weak sterling – amid Brexit fears. The pound suffered market jitters ahead of a speech tomorrow by Prime Minister Theresa May at Lancaster House in London. May is expected to set out the UK government's position in the negotiations with the European Union on Brexit, ahead of the triggering of article 50 by the end of March.

The FTSE 100 opened up 0.2%, or 12.98 points, at 7,350.79. On Friday, the blue-chip index closed at a record high for a 12th consecutive trading day, its 14th consecutive session finishing higher. On Monday after the open, the index touched a new record intraday high of 7,354.14.

Just after the open in London, banking stocks were among the biggest fallers in the FTSE 100, with Royal Bank of Scotland Group (RBS) down 2.3%, Lloyds Banking Group (LLOY) down 1.3% and Barclays (BARC) down 1.2%. The biggest gainers in the blue-chip index were miners, with Fresnillo (FRES) up 2.9%, Anglo American up 2.8% (AAL) and Glencore (GLEN) up 2.3%.

“In the near term this is clearly good news for personal investors. Investors with a broad exposure to the market, for example to an index fund following the FTSE All-Share, have seen their investments rise by more than 2% since the beginning of this year, and by more than 15% since January 1 2016.

“To put that in context, locking your cash away in a four to five year bond with a bank would currently only earn you about 1.5% a year,” said Richard Stone, Chief Executive at The Share Centre.

“The big question is whether the market can hold these levels or even continue its upward trajectory. The simple answer is no one really knows.”

Julie Dean, UK equity fund manager for Sanditon, warned last week that future UK stock market gains were limited, and investors should be wary of overpriced assets.

“This has been a drawn out economic recovery,” she saids. “Global growth is lower than in previous cycles but the stock market has enjoyed a much greater level of returns because of 0% interest rates. This creates very expensive certain sectors – defensive stocks in particular.”

The same can be said of the US stock market. Dean pointed to economic indicators which suggested we were coming to the end of the economic cycle, such as the employment level in the US, which is at a near all-time high. “History shows us that when employment is at this level, it is usually followed by a stock market correction.”