London stocks struggled for traction on Monday, boosted by shares of mining companies as commodity prices climbed, but were held back by a strong pound.
The FTSE 100 index
traded flat at 7,133, while the pound
surged to $1.4120, a level not seen since early 2018. A strong home currency weighs on earnings of many big blue chips that derive revenue from overseas. When the pound is weaker, the opposite occurs.
The pound’s strength came after the Scottish National Party narrowly failed to get an outright majority in the Scottish Parliament elections. The leader of that party, Nicola Sturgeon, told U.K. Prime Minister Boris Johnson that another referendum on independence is inevitable.
“The pound’s reaction suggestions that with the SNP unable to secure that absolute majority, there isn’t a clear democratic mandate to pressure London into granting another referendum anytime soon. Hence, it’s a narrow win for pro-union forces as the Conservative government can keep rejecting calls for another vote,” said Marios Hadjikyriacos, investment analyst at XM, in a note to clients.
“With political risk fading for now and the Bank of England preparing the ground for ending QE [quantitative easing] later this year as the British economy kicks into higher gear, the outlook for sterling remains favorable,” said the analyst.
A bump in commodity related stocks was unable to lift the main London index.
Shares of major oil companies BP
rose 2% and 1.6%, respectively. Oil prices rose earlier in the day, before pulling back following a cyberattack on a key fuel line in the U.S. operated by Georgia-based Colonial Pipeline, which delivers around 45% of fuel used by the East Coast. Under such an attack, hackers paralyze the computer systems and networks of a company, demanding a ransom to reverse that.
Futures for June crude oil futures
and international benchmark Brent crude
dipped 0.6% each and natural gas prices
also eased off by 1.5%. Analysts have voiced concerns about possible shortages in the U.S. if the Colonial Pipeline situation isn’t resolved.
Elsewhere, mining stocks rose as iron ore futures surged in Singapore past $226 a ton, boosted by demand from China and a general recovery for the global economy. Iron-ore prices also surged last week. July copper futures
were earlier up 2.5% before moving back to trade at $4.7530, hovering near Friday’s closing record high. Copper prices rose 6.3% last week, the biggest weekly jump since the week ended Feb. 19.
Shares of Rio Tinto