On the other hand, stocks with bond-like characteristics have tumbled — notably real-estate firms whose value is tied to the yield provided by their rental income. Housebuilders face slower revenue growth if pricier mortgages deter home buyers. UK companies that make their money in their home market and buy supplies from abroad will feel the squeeze from the exchange rate. That applies to much of the FTSE 250 mid-cap index.
The recent selloff in gilts and sterling has left some sectors of the UK stock market trading at levels last seen in 2023, reinforcing the perception that London is a market global equity investors can safely ignore. It’s hard to see a speedy and likely path out of the mire.
The stock market’s reaction to rising borrowing costs and a declining currency has been textbook. The FTSE 100 blue-chip index, dominated by multinational companies generating revenue from overseas, has held its own. As Goldman Sachs Group Inc strategists point out, sterling weakness should be supportive.
