Pound dives against the dollar as interest rate hike hopes are dashed by inflation holding at 2.6pc

21-08-2017

Retailing giant Next slipped towards the bottom of the FTSE 100 after Berenberg delivered a scathing critique of the clothing store’s recent share price rally, warning that its resistance to change could lead to a similar demise as US photo firm Kodak.

Shares tumbled 124p to £42.71, a 2.8pc dive, after the broker argued that, while the retailer had quickly recognised the online opportunity, it had failed to fully adapt to the new e-commerce environment.

It had instead short-sightedly remained steadfast to past profitability models, it added, likening Next’s possible trajectory to Kodak’s plunge into bankruptcy as its lack of exposure to the emerging digital camera market began to bite.

It told clients that Next’s 9.5pc rally following its weather-distorted earnings beat earlier this month had now made the stock a prime shorting target, with traders betting its shares will fall – the practice of borrowing shares to sell and rebuy later when they have fallen in price to pocket the difference.

“We believe Next is burdened by its overspaced store estate, which restricts its ability to invest in areas that matter most to the consumer – product and free home delivery, leading to market share erosion,” the broker said, downgrading the stock from “hold” to “sell”.

Elsewhere, German airline Air Berlin filing for insolvency propelled its rival easyJet to the top of the blue-chip leaderboard as hopes surfaced that the no-frills carrier can now bump up its market share.

The low-cost airline brushed off claims yesterday from French pilots that it is risking safety with its cluttered flight schedule to finish 57p higher at £13.22.

Analysts believe that fellow German operator Lufthansa is best positioned to snap up the debt-burdened company’s assets but London-listed operator TUI has also been sounded out as a possible buyer, lifting its shares 29p to £13.19. British Airways-owner IAG flew 18p higher to 631p from a read across while FTSE-250 carrier Wizz Airjumped 130p to £29.32, albeit on the paltry trading volumes typical of this time of summer.

On the wider index, the effects of investors returning to riskier assets started to wear but the pound’s 1pc plunge against the dollar lifted London’s exporters as the chances of an interest rate hike at the Bank of England subsided on yesterday’s weaker-than-expected inflation data. Buoyed by sterling’s slump, the FTSE 100 advanced 29.96 points to 7,383.85.

China-exposed mining stocks slumped as fresh data pointed to a slowdown in the Asian powerhouse’s housing market and therefore weaker demand for commodities. BHP Billiton and Rio Tinto slid 19p to £13.42 and 37.5p to £33.76, respectively, while Randgold Resourcessuffered most from gold and silver’s continued retreat, diving 235p to £72, a 3.2pc fall. 

Source: http://www.telegraph.co.uk/business/2017/08/15/pound-pushed-back-dollar-ahead-key-uk-inflation-data/