UK FTSE 100 Drops after a Strong GBP and Poor Barclay Results

FTSE100FTSE 100 which is the premier index of Britain saw its biggest decline in months past week because of the poorer than expected results from Barclays and not so encouraging economic results. FTSE 100 dipped low by 0.5% to close at a figure of 7203.94 bringing the weekly gain down to 1.3%.

FTSE 100 was down 1.6% for the entire month largely because increasing the value of Pound by over 3 percent against the dollar.

Blue chips experienced the biggest decline since November last year and it is mostly because of the Pound getting stronger which gained to $1.29 in spite of reports that stated that UK growth has been marred by more than what was expected in Q1 2017.

The jump in Pound was led by British Prime Minister Theresa May’s decision to call for a snap general election for getting mandate before the Brexit talks in the near future.

Merrill Lynch, who is an analyst at Bank of America, has speculated that UK equities are likely to be influenced by pound during the upcoming 12 months. The rally is not expected to last as they believe it will be checked by the economy of United Kingdom.

The GDP of the country in the 1st quarter was lower than expected with increasing inflation hitting the consumer confidence and slowing growth.  As per the official data, the economy of UK grew by 0.3% and misses the estimate of 0.4%. The Office for National Statistics attributed the gap to services segment seeing a drop.

A senior UK economist at Berenberg, Kallum Pickering, commented that the deceleration in the economy is a frightening thing, the trend rate was around 0.4%. According to Pickering, the economy was in the 8th year of expansion and the labour market was at complete employment.

FTSE 100 was dragged down after the poor performance by banking major Barclays. The first quarter results of the bank are extremely disappointing in spite of double profits due to investment banking division failure in taking advantage of the trading boom in bonds.

Laith Khalaf, who is a senior analyst at Hargraves Lansdown made the following statement:

Taking a bit of a longer-term view, Barclays is still in a state of recovery and is moving towards its goal of being a UK retail bank and a transatlantic corporate bank, but this particular quarter I think the results were a bit disappointing compared to what analysts were expecting.

The other banking firm results for this quarter is quite promising, unlike Barclays. Royal Bank of Scotland witnessed its first quarterly profit since September 2015 and showing positive signs of a turnaround. Another firm Lloyds Bank also experienced growth and there is an increase in share prices by 0.3 percent.

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