Britain’s top shares index lost ground on Tuesday, as a drop in Asian-focused bank Standard Chartered and Provident Financial weighed on the market.
The blue-chip FTSE 100 index, which in August had reached its highest level since June 2015, fell 0.2 percent to 6,863.92 points in early session trading. It also underperformed a firmer performance on other European markets.
Standard Chartered fell 1.8 percent, the worst-performing stock on the FTSE 100, after Barclays cut its rating on StanChart to “underweight” from “equal weight”.
Rival Asian-focused bank HSBC also dipped 0.5 percent, while a price target cut from RBC Capital Markets on Provident Financial pushed down Provident Financial shares.
Traders added that a rise in sterling was adding further pressure to the FTSE 100, whose internationally-focused and export-driven companies typically benefit when the pound weakens.
“The appreciation in the pound continues to put pressure on the FTSE on the downside,” said London Capital Group senior market analyst Ipek Ozkardeskaya.
Sterling rose to trade near a 7-week high against the dollar, amid expectations that Britain had probably dodged a recession in coming months with the economy showing signs of resilience in the aftermath of the Brexit vote.
While that was weighing on the FTSE 100, the FTSE 250 mid-cap index – whose companies are more exposed to the domestic UK economy – reacted more positively to rise 0.2 percent, since a stronger pound can boost consumer spending.
Housebuilder Berkeley Group, which is dropping out of the FTSE 100 after a slump in its shares caused by concerns about slowing demand following Britain’s vote to leave the European Union, rallied 3.6 percent.
Berkeley said its market had stabilised after a jump in cancellations in the wake of June’s Brexit vote, while a similarly confident outlook drove up shares in rival housebuilder Redrow.
Horizon Stockbroking director Kyri Kangellaris said the FTSE 100 would be underpinned by record low interest rates in Britain, which have hit returns on bonds and cash and driven investors over to the better returns available from shares.
“Stocks are the least bad investment at the moment,” he said.
The FTSE 100 remains up around 10 percent in 2016.