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FTSE 100’s fresh new high ‘a hollow victory’

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The FTSE 100 reached an all-time intraday high on Tuesday as the pound continued its downward spiral.

The UK’s benchmark share index hit 7,129.83, eclipsing the previous record high of 7,122 reached in April 2015.

Sterling fell to €1.11 and $1.23 amid fears of a hard Brexit.

While the FTSE’s fresh high is good news for UK investors as it will boost their pension and ISA pots, Laith Khalaf, senior analyst at Hargreaves Lansdown, called it a “hollow victory” because it was based on “movements in currency markets” rather than “any positive reassessment of the productivity of UK-listed companies”.

He said the concern will be a reversal in fortunes for the currency wiping out any gains, but added “it’s hard to see anything in the foreseeable future” that will propel the pound back to its former glory.

The weak sterling has led to a surge in the FTSE 100 because British companies’ overseas earnings are more valuable on translation back into pounds.

Investors wanting to take advantage of the FTSE 100’s recent rich vein of form should tread with caution, according to Tom Stevenson, investment director at Fidelity International.

“There are some question marks over how long the currency effect can prevail if Brexit means a slowdown in the broader economy,” he said.

Having said that, stock valuations currently look reasonable.

“The valuation of the UK market is not excessive and still looks attractive for investors looking to shares for income, growth and stability,” said Stevenson.

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