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MARKET WRAP: FTSE finishes lower, EUR/GBP hits 23-month low

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Key Points

FTSE 100 closing price of 7,582.61 (-0.1%)
AB Foods props up FTSE after results
GSK declines as Unilever says won’t up bid for Consumer Healthcare unit
EUR/GBP hits 23-month low
Crude holds gains after oil data
Bitcoin edges higher as US stocks on track for best day of year

By Samuel Indyk

Investing.com – The FTSE 100 edged lower on Thursday despite a rally in US stocks, as Associated British Foods (LON:ABF) tumbled following results and the announcement of job cuts.

The Primark owner said it was cutting 400 jobs at its Primark stores and said that sales have yet to return to pre-pandemic levels. In the 16 weeks to 8th January, sales were up 19% to £5.6 billion but the surging Omicron variant at the end of the year may have impacted footfall, however, there is hope that the impact will be shortlived.

“The rapid spread of Omicron across the UK in December was a major headwind for Primark given it is reliant on people visiting its shops because it doesn’t have a website where you can buy clothes,” AJ Bell Investment Director Russ Mould said. “Yet it seems to have shrugged this negative factor off, confidently saying that a recovery in footfall to its shops is already being seen after a short period of disruption.”

GlaxoSmithKline (LON:GSK) shares declined after Unilever (LON:ULVR) said they would not be increasing their £50 billion bid for GlaxoSmithKline’s Consumer Healthcare unit, a majority-owned joint venture with Pfizer (NYSE:PFE). Top London fund manager and major Unilever shareholder Terry Smith was again critical of Unilever’s approach, calling the company’s bid for the division a “near-death experience”. The FT reported that Smith’s flagship fund, Fundsmith, owned a £814 million position in Unilever, making it the company’s 13th largest shareholder.

In FX markets, GBP was notably strong with EUR/GBP dropping to its lowest level since February 2020. Support was observed ahead of 0.8300 with the political turmoil in Downing Street failing to have much of an impact on the currency market so far. Instead, focus is on the Bank of England and expectations of further tightening at its February meeting.

WTI and Brent crude futures again edged higher with the latter approaching $89/barrel. The delayed weekly inventory data from the Energy Information Administration showed stockpiles increased by 515,000 barrels in the latest week. Analysts had expected a drawdown of 938,000 barrels. The EIA said crude stocks in the Strategic Petroleum Reserve fell to their lowest level since November 2002.

“US crude oil inventories are about 8% below the five year average for this time of year,” The EIA said.

Bitcoin edged higher, in line with US stocks, as the S&P 500, Dow Jones Industrial Average, and Nasdaq 100 were all on course for their best day of the year. However, the world’s largest cryptocurrency remained within its recent range between $40,000-$45,000.

“It doesn’t feel like we’ll have to wait long for an aggressive breakout one way or another but at this point, it’s hard to say in which direction that will come,” OANDA Senior Market Analyst Craig Erlam said.

“If interest rates are its kryptonite then it could still be in for a rough ride as anxiety around monetary tightening remains heightened.

“But I’m not convinced that will remain the case and it may just be a case of the cryptocurrency biding its time.”

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MARKET WRAP: FTSE finishes lower, EUR/GBP hits 23-month low

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