FTSE 100 slips as sterling loses ground

Trader in London Image copyright Getty Images

Sterling fell after the Bank of England's new deputy governor indicated he was not in favour of raising rates.

Speaking to MPs on the Treasury Committee, Dave Ramsden said he did not believe a rate rise would be needed "in the coming months" because wage growth showed few signs of picking up.

The pound fell 0.4% against the dollar to $1.3195, the first time in four days it has dropped below $1.32.

The comments overshadowed a pick-up in UK inflation to 3% last month.

The fall in the pound helped to boost the FTSE 100 in early trading, but the index lost ground later eventually closing down 10.8 points at 7,516.17.

The index often rises when sterling falls, as the weaker currency raises the value of companies' overseas earnings when they are brought back to the UK and converted back into pounds.

Shares in Madame Tussauds owner Merlin Entertainments sank 16% after it said summer trading had been poor due to bad weather and terror attacks.

The company, which also runs Legoland theme parks, said it now expected full-year like-for-like revenues to be unchanged from last year.

It also forecast full-year earnings of £470m-£480m, compared with analysts' estimates of £490m.

But there was better news from publisher Pearson, which saw its shares rise 7% after it said full-year operating profit was set to come at the top half of its predicted range.

The company has issued a string of profit warnings after being caught out by the shift from print to digital, but it said cost cuts and a pick up in eBook revenues were now helping.

Pearson now expects operating profit to be between £576m and £606m this year, against a previous estimate of £546m-£606m.