London stocks drop on strong pound

London / AFP

London’s stock market fell on Monday on a rallying pound, while eurozone indices rose further after a pre-weekend surge triggered by well-received US jobs data.
Around 1015 GMT, London’s benchmark FTSE 100 index was down 0.25 percent, as the pound jumped above $1.33 in the wake of strong UK services sector activity that further eased concerns Brexit’s economic fallout.
“August saw the UK economy score a hat-trick of good news with a record rebound in the services PMI to round things off after solid readings for the manufacturing and construction sectors,” said Forex.com analyst Fawad Razaqzada.
“This is really good news for the pound, perhaps not so good for UK stocks in the short-term as it reduces the odds for further rate cuts from the Bank of England.”
Activity in Britain’s crucial services sector recorded a record jump in August, rebounding strongly from a slump immediately following the country’s vote to exit the EU, a survey showed Monday.

Avoid recession
The latest Purchasing Managers’ Index data mirrors a strong recovery for the manufacturing PMI month-on-month, indicating that Britain is likely to avoid a recession following the outcome of the Brexit referendum in June, at least in the short term, according to analysts.
The PMI for the services industry surged to 52.9 points in August, from 47.4 in July. A reading under 50 indicates shrinkage to activity.
In eurozone stocks trading on Monday, Frankfurt’s DAX 30 index advanced 0.3 percent and the Paris CAC 40 won 0.4 percent.
Europe’s main indices closed between 1.4 and 2.3 percent higher on Friday, as a slowdown in US jobs creation doused expectations for an interest rate hike this month from the Fed, while at the same time showing the world’s top economy was still improving.
Playing catch-up Monday, Tokyo’s benchmark Nikkei 225 index closed at a three-month high, leading a broader rally across Asia.
The much-anticipated jobs reading on Friday showed 151,000 new posts in August, below expectations but indicating that hiring remained solid.
Before its release analysts had seen the reading as a guide to the Federal Reserve’s plans after its boss Janet Yellen — and later her vice chairman Stanley Fischer — suggested a rate rise could come this year.
While most market-watchers suggested the below-par reading would likely mean no increase this month, there are still some who think a hike could come soon.
“Our take is that the (Fed policy committee) will continue to proceed cautiously, with a September rate hike a tad early,” Cameron Bagrie, chief economist in Wellington at ANZ Bank New Zealand, said in a research note.