Britain's top shares index fell on Thursday, although it remained near record highs, with budget airline easyJet sliding lower after issuing a profit warning. The bluechip FTSE 100 index closed down 0.5 percent at 6,999.96 points - still near its record intraday high of 7,122.74 points reached in April 2015. EasyJet fell 6.9 percent after the company warned its profit would fall by more than 25 percent this year, saying security issues had dampened demand while low fuel prices meant there was more competition in the European short-haul market.
"We cut 2017 estimated pre-tax profit by 11 percent to 405 million pounds ($512.20 million) as pricing continues to suffer," said Credit Suisse analyst Neil Glynn, in a note on easyJet. Glynn kept a "neutral" rating on easyJet shares. The FTSE 100 rose to a 17-month high earlier this week and is up by 12 percent so far in 2016. The Bank of England's decision in August to cut interest rates to record lows of 0.25 percent has propped up the FTSE 100 and enabled it to recover from an initial slump in late June after Britain's shock "Brexit" vote to quit the European Union.
Rock-bottom rates have hit returns on bonds and cash, driving investors to the better returns available from stocks. The FTSE 100's international companies have also benefited from a fall in sterling this week. Many of these companies earn much of their revenues in US dollars and therefore get a currency-related accounting lift as those dollars are converted back to pounds. However, the slump in sterling has also impacted the US dollar value of FTSE 100 stocks, a potential negative for overseas investors for whom the dollar is their benchmark currency reference. Roderic Owen-Thomas, director at London-based firm Mayfair Capital Limited, expected the FTSE 100 to make little progress for the rest of 2016, given underlying concerns over Brexit. "We feel that most of the upside is complete for this year," he said.
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