Stronger pound weighs on exporter-heavy FTSE 100, midcaps shine

he UK blue-chip index dipped on Friday as exporters weakened due to a stronger pound, while the more domestically-focussed midcap bourse eked out slim gains after strong retail sales data alleviated some concerns over an extended economic slowdown.

The FTSE 100 index (FTSE), which makes two-thirds of its earnings from abroad, was off 0.3% by 0730 GMT, while the FTSE 250 index (FTMC) outperformed with a 0.2% rise.

International companies, including pharmaceutical giant AstraZeneca (L:AZN) and consumer goods company Unilever (L:ULVR), were among the biggest drags on the main index.

Data showed British retail sales surged past their pre-coronavirus level last month, with investors now waiting for the purchasing managers’ index survey due later in the morning for signs of a steady recovery.

“These numbers are encouraging, despite the challenges facing the UK economy, of which there are many, particularly around sustainability of the furlough,” said CMC Markets analyst Michael Hewson.

Retailers were among the top mid-cap gainers in early trade, with Marks & Spencer (L:MKS) climbing 2% and sportswear retailer Frasers (L:FRAS) rising 4%.

Corporate news flow was thin, saving HG Capital (L:HGT) that topped the FTSE 250 index with a 6% jump after announcing further investment in software company Visma.

The blue-chip FTSE 100, which suffered its steepest one-day drop in three weeks on Thursday, was headed for a weekly loss after two consecutive weeks of gains.

While the S&P 500 and Nasdaq have notched record highs thanks to a recent rally in technology stocks, the FTSE 100 is off by a staggering 24% from its all-time peak hit in 2018.

The underperformance can be attributed to Britain’s economy suffering the biggest contraction by any major economy so far, as well as uncertainty over terms of the Brexit deal as the end of the transition period draws nearer.