FTSE 100 stutters as pound below $1.27 for first time since 1985

The pound has continued to slide against the dollar on Wednesday - but the movement failed to spark a rally on the FTSE 100.

London's premier share index climbed towards its record high on both Monday and Tuesday as sterling's value was hit by market fears of a 'hard Brexit' for the UK after Theresa May confirmed the process for leaving the EU would begin by the end of March next year.

The mid-cap FTSE 250 hit a new record level as the value of exporters and those selling in dollars surged.

But the rally petered out on Wednesday despite the pound falling below the $1.27 mark to new 31-year lows versus the dollar as Asian markets, followed by those in Europe, weighed fears about central bank stimulus.

They include expectations the US Federal Reserve will hike interest rates in December as its tentative economic recovery continues and the European Central Bank will also tighten monetary policy by cutting back on its €80bn of monthly bond purchases.

Rebecca O'Keeffe, head of investment at stockbroker Interactive Investor, said: "Both equity and bond market valuations have been founded on monetary support from global central banks and have arguably become hooked on quantitative easing and low interest rates.

"The possibility of central banks returning to a more normal regime could see taper tantrums resume, volatility spike and investors flee."

The FTSE 100 was down 0.5% at 7039 in afternoon trading on Wednesday as the pound rallied to $1.27.30

Its highest intraday level is 7123. It got as high as 7122 on Tuesday before falling back to close at 7074.

Germany's DAX and the CAC in France were 0.3% and 0.4% lower respectively.