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Markets remain buoyant

FTSE 100 hits new high as inflation curbs pound

Money - own picThe FTSE 100 continued its record-breaking run with another closing high today fuelled by a slip in the value of sterling following new inflation figures.

The index of leading shares soared above the 7,500 level for the first time and closed at an all-time high of 7,522.03 – up 67.66 points or 0.9% for the day.

Sterling dropped below $1.29, despite the inflation rate jumping to 2.7% last month from 2.3% in March. The pound fell 0.7% against the euro to €1.1663.

A weaker pound lifts the FTSE 100 because many of its constituents have big earnings from overseas which are worth more when converted back into sterling.

Inflation hit its highest level since September 2013, building on its sharp rise since the vote to leave the European Union.

Much of the rise in April was due to the late timing of the Easter holiday which pushed up air fares. But the combination of sterling’s fall and higher oil prices are pushing up inflation across the board for consumers and businesses.

Vodafone was the biggest riser despite news of €6 billion loss. Investors were encouraged by the outlook and dividend statement.

Shares in EasyJet fell 5.3% after the airline also slumped to a half-year loss.

CYBG, holding company for the Clydesdale Bank, fell 4% after its half-year earnings undershot the market’s expectations.

Commenting on the inflation figures, Liz Cameron, Chief Executive of Scottish Chambers of Commerce, said: “Whilst part of the reason for this latest increase in inflation might be due to the timing of Easter and the consequent impact on the cost of flying, the fact remains that there are continued upward pressures on prices from a range of sources and the Bank of England last week said that it expected inflation to continue upwards to almost 3% later in the year.

 “The impact on Scottish business and the Scottish economy is two-fold.  Rising prices impact on businesses’ costs and their ability to invest and create jobs, whilst weakening real incomes could depress consumer spending, which has been the strongest driver of economic growth in Scotland over the past few years.

“These challenges, coupled with ongoing political uncertainty represent a risk for the Scottish economy, which our politicians must respond to.  With a General Election campaign in full swing, politicians of all parties must remember that it is Scotland’s businesses that are the creators of jobs, wealth and growth in our economy, and businesses will be examining the various Parties’ plans to address this situation with keen interest.”

 

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