Brexit And Dollar Buffet London Stocks

LONDON, , (APP - UrduPoint / Pakistan Point News - 23rd Nov, 2016 ) - A sharp slowdown in British growth due to Brexit and a rebounding Dollar delivered a jolt to London stocks on Wednesday, while the Dow continued to push higher into record territory.

While the benchmark FTSE 100 index rose modestly ahead of the presentation of Britain's first budget update since the Brexit vote, those gains disappeared after finance minister Philip Hammond told parliament Wednesday that gross domestic product was expected to grow by only 1.4 percent next year -- sharply down from the prior estimate of 2.2 percent given in March.

"Markets in Europe have again struggled to keep track of record breaking US markets, rolling over into the afternoon session on the back of a selloff in bond markets and a sharp rise in the US dollar," said Michael Hewson, chief market analyst at CMC Markets.

A late rally helped the FTSE 100 close practically flat. "It would appear that bond investors are starting to price in the prospect of higher inflation expectations as he announced extra spending on rail, telecoms and housing as he pushed back plans to balance the books by the end of the parliament," added Hewson.

The rate of return to investors on 10-year British government bonds rose by 0.1 percentage point to 1.466 percent. A spike in the value of the dollar also cut short early gains in mining companies listed in London, as a strong greenback depresses sales of dollar-denominated commodities.

The dollar shot higher following the release of data showing new orders for US manufactured durable goods rose by a sharp 4.8 in October, driven almost entirely by transportation equipment and far surpassing expectations.

Meanwhile US unemployment claims remained at a relatively low level. The euro lost nearly a cent in European trading, to stand at $1.0548 in afternoon trading. The dollar spiked to a near 8-month high of 112.97 yen.

- 'Mind boggling' - =================== The dollar has been trading around 14-year heights as markets expect the US Federal Reserve to hike interest rates at their next meeting in December.

FXTM Research Analyst Lukman Otunuga said "speculation of a December rate hike reached mind boggling levels" with markets having "priced in a surreal 100 percent probability of the Federal Reserve taking action before year end".

The Fed is due later Wednesday to release minutes of its most recent policy meeting. "With US interest rate increase almost a done deal next month, most may be paying attention to clues on interest rate timings for 2017," said Otunga.

The Dow added modestly to its record level, pushing 0.1 percent higher approaching midday. New York's Dow Jones Industrial Average finished Tuesday above 19,000 for the first time ahead of this week's US Thanksgiving holiday.

The post-election rally has been propelled by expectations of pro-growth policies from President-elect Donald Trump. Investors expect Trump's administration will cut taxes, ramp up infrastructure spending and slash regulations, all of which would likely fan inflation -- in turn putting pressure on the Federal Reserve to raise rates.

Most Asian markets rose again Wednesday, tracking the record close on Wall Street, while the dollar held onto its gains against the Yen on expectations of a US interest rate rise. - Key figures around 1630 GMT - =============================== London - FTSE 100: DOWN 0.03 percent at 6,817.71 points (close) Frankfurt - DAX 30: DOWN 0.5 percent at 10,622.44 (close) Paris - CAC 40: DOWN 0.4 percent at 4,529.21 (close) EURO STOXX 50: DOWN 0.2 percent at 3,037.63 New York - Dow: UP 0.1 percent at 19,048.49 Hong Kong - Hang Seng: DOWN 0.01 percent at 22,676.69 (close) Shanghai - Composite: DOWN 0.2 percent at 3,241.14 (close) Tokyo - Nikkei 225: Closed for holiday Euro/dollar: DOWN at $1.0548 from $1.0627 Tuesday Dollar/yen: UP at 112.75 yen from 111.05 yen Pound/dollar: UP at $1.2432 from $1.2420 Oil - West Texas Intermediate: DOWN 2 cents at $48.01 per barrel Oil - Brent North Sea: DOWN 12 cents at $49.00