A weaker pound pushed stocks higher in London Tuesday, while investors also mulled Brexit-influenced data, and Bank of England contingency plans ahead of important talks in Brussels.
London’s FTSE 100 gained 0.7 per cent, helped by a drop in the pound that lifted share prices of multinationals listed on the benchmark index.
Eurozone indices closed higher as well after dipping in and out of negative territory during the day.
“Stocks continue to shrug off no-deal Brexit worries, as UK and EU negotiations are scheduled in Brussels ahead of the March 29 divorce deadline,” analysts at Charles Schwab wrote.
In New York, trading was subdued at midday with the Dow Jones Industrial Average essentially unchanged.
The British pound retreated as hiring by companies dropped at the fastest pace in seven years amid Brexit uncertainty, though other data showed that output in Britain’s key services sector had risen slightly in February.
The Markit/CIPS services survey rebounded to 51.3 in February from a 29-month low of 50.1 in January.
Read More: UK firms report weakest growth since April 2013: CBI
The data “suggests that at least some of the concern about Brexit’s impact on the economy has been overdone”, noted research group Capital Economics in a client note.
Meanwhile, the EU’s lead Brexit negotiator Michel Barnier met Britain’s negotiating team as both sides sought solutions a few weeks before this month’s looming Brexit deadline.
The Bank of England warned that Europe’s financial system faced “potential risks” from a no-deal Brexit, as it extended weekly lending facilities to include euros.
The BoE warned in a statement that “some disruption to cross-border services is possible and, in the absence of other actions by EU authorities, some potential risks to financial stability remain.”
US-China trade hope
Earlier Tuesday, most Asian stock markets retreated as investors awaited developments in China-US trade talks, though Shanghai posted a strong gain as China unveiled massive tax cuts to support the economy.
Optimism that the world’s top two economies were heading for a tariffs deal was replaced by a need for clarity on any agreement.
Shares have enjoyed a blockbuster start to the year, but “trade optimism could only take the stock market so far”, said Oanda senior market analyst Alfonso Esparza.
“High-level talks between the two largest economies have been ongoing and although they appear close to bearing fruit, the fact remains that the optimism has already been priced in,” he added.
Tokyo ended 0.4 per cent lower, Sydney eased 0.3 per cent, Singapore and Seoul were each 0.5 per cent off and Taipei dropped 0.4 per cent.
But Shanghai jumped 0.9 per cent while Hong Kong inched up after China announced hundreds of billions of dollars worth of tax cuts to stimulate the economy.
Beijing will also increase spending, with the fiscal deficit set to increase to 2.8 per cent of GDP, from 2.6 per cent last year.
The government is aiming for economic growth of 6.0-6.5 per cent in 2019, below last year’s 6.6 per cent, the lowest level in three decades.
The move comes as Chinese leaders are struggling to address a mounting debt crisis as well as the trade row.
Leave a Comment