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London / AFP
Shares in Samsung Electronics tumbled Tuesday after the company junked its Note 7 smartphone, while the anaemic pound helped push Britain’s stock market to a record high.
The weak pound, flailing in the wake of Britain’s June vote to quit the European Union, helped push London’s FTSE 100 index of top blue-chip companies to 7,129.83 points, beating the previous record high set on April 27, 2015. “There’s been two key factors driving the FTSE to record highs,” Oanda analyst Craig Erlam said.
“The first is the dramatic depreciation of the pound, as a large proportion of FTSE 100 company profits are generated abroad. The weak pound therefore boosts earnings in sterling terms.” The pound has lost nearly 18 percent since British voters narrowly approved the Brexit referendum.
XTB’s David Cheetham noted that with over 80 percent of revenues of FTSE 100 companies generated in currencies other than sterling “a depreciation of the pound gives the index a de facto boost.”
The other factor was Monday’s rebound in oil prices which helped buoy FTSE 100 index which is heavy in energy related companies.
“A rise in the price of oil is obviously beneficial for these companies as it increases their profitability,” said Erlam. Oil prices soared Monday in response to comments from President Vladimir Putin that Moscow was ready to align with OPEC’s push to limit output and address a supply glut.
But the International Energy Agency warned Tuesday that the glut may weigh on world markets deep into next year — unless the OPEC producer cartel makes good on its promise to cut output
Incendiary effect
As London soared, elsewhere Samsung’s woes dominated.
Stock in the world’s biggest smartphone maker tumbled eight percent, sending Seoul stocks sliding 1.2 percent after the tech giant told customers to stop using their Galaxy Note 7 devices and called a halt to worldwide sales as US officials warned the handsets could blow up.
The group halted production on Tuesday and then announced it was scrapping the model, once markets had shut in Asia. Samsung advised consumers with Note 7s to power down and stop using them. The announcement came a little over a month after Samsung announced a recall of 2.5 million Note 7s in 10 markets following complaints that its lithium-ion battery exploded while charging.