London | Samsung Electronics scrapped production of its doomed Note 7 smartphone today, sparking a fresh collapse in its share price, while Britain’s stock market hit a record high even as global markets struggled to maintain an oil-fuelled rally.
The weak pound, flailing in the wake of Britain’s June vote to quit the European Union, helped push London’s FTSE 100 index of top blue-chip companies to 7,129.83 points, beating the previous record high set on April 27, 2015.
In early afternoon trading the index stood just off that high at 7,115.46 points.
“There’s been two key factors driving the FTSE to record highs,” Oanda analyst Craig Erlam told AFP.
“The first is the dramatic depreciation of the pound, as a large proportion of FTSE 100 company profits are generated abroad. The weak pound therefore boosts earnings in sterling terms.”
The energy-heavy benchmark FTSE 100 index has also been buoyed by yesterday’s rebound in oil prices.
“A rise in the price of oil is obviously beneficial for these companies as it increases their profitability,” Erlam said, noting the reversing of a two-year oil price trend amid Moscow’s apparent willingness to address with OPEC a supply glut.
XTB’s David Cheetham put the market surge as “in part due to a falling pound. Over 80 per cent of revenues on the index are generated in currencies other than sterling and therefore a depreciation of the pound gives the index a de facto boost.” Regarding Brexit, Cheetham said there appeared to be thus far “little fallout from the historic vote and stocks remain well supported by the Bank of England’s easing of monetary policy.”
As London soared, Samsung’s woes dominated elsewhere.
Stock in the world’s biggest smartphone maker tumbled eight per cent, sending Seoul stocks sliding 1.2 per cent after the tech giant told customers to stop using their Galaxy Note 7 devices and called a halt to worldwide sales as US officials warned the handsets could blow up.
The group halted production today and then announced it was scrapping the model, once markets had shut in Asia.
Samsung advised consumers with Note 7s to power down and stop using them.
The announcement came a little over a month after Samsung announced a recall of 2.5 million Note 7s in 10 markets following complaints that its lithium-ion battery exploded while charging.
“The group’s flagship handset has turned out to be worse than a dud – it is a dangerous fire risk,” City Index analyst Ken Odeluga told AFP.
“This incendiary effect has spread to Samsung’s shares.”