LONDON MARKETS: U.K. Stocks Rise As Starting Gun For Brexit Gets Set To Fire
March 29 2017 - 3:45AM
Dow Jones News
By Sara Sjolin, MarketWatch
Oil giants rise as crude continues to climb
U.K. stocks rose for a second straight day on Wednesday, boosted
by a falling pound, as traders prepared for Britain to trigger
Article 50 and kick off the formal process of Brexit.
The FTSE 100 index added 0.4% to 7,370.03, setting it on track
for its highest close in more than a week.
Sterling dropped to $1.2414
(http://www.marketwatch.com/story/british-pound-under-pressure-ahead-of-brexit-trigger-2017-03-29),
down from $1.2450 late Tuesday in New York. A cheaper pound tends
to boost the London blue-chip index, as it boosts earnings for
companies that make the bulk of their money overseas.
Read:How to trade the pound as Theresa May pulls the Brexit
trigger
(http://www.marketwatch.com/story/avoid-being-short-with-the-crowd-how-to-trade-the-pound-as-may-pulls-brexit-trigger-2017-03-28)
On Tuesday evening, U.K. Prime Minister Theresa May signed the
letter invoking Article 50 of the Treaty of Lisbon. The act will
formally begin the country's exit from the European Union, which it
joined more than 40 years ago.
The letter is expected to be hand-delivered to Brussels around
lunchtime by the British ambassador to the EU, Tim Barrow. Soon
after that, May plans make a statement to parliament to confirm
Article 50 has been triggered and that the countdown to the
two-year divorce negotiations has begun.
"We're in for a long period of volatility for the pound and U.K.
assets as the government embarks on protracted and hugely
challenging Brexit negotiations," said Neil Wilson, senior market
analyst at ETX Capital, in a note.
The big question now is whether Brexit has been fully factored
in, according to the analyst.
"A truly hard Brexit has not been priced into sterling. We could
see it move lower still if negotiations take a sour turn -- $1.10
is feasible," he added.
A "hard Brexit" refers to a scenario in which the U.K.
sacrifices trade deals with the EU in return for full control of
its borders. Balancing between this and less drastic changes will
be a challenge for the British prime minister, Wilson said.
"It's a fine line for May to tread, as she's in hock to the hard
Brexit camp in the Conservatives. She also doesn't want to be seen
to cave into demands from Scottish nationalists for a softer exit,"
he said.
"All this points to sustained risk for sterling -- if an
acceptable deal isn't done in time, then the U.K. crashes out of
the bloc on WTO terms and all the tariffs that entails," he
added.
Scottish First Minister Nicola Sturgeon has called for the U.K.
to remain in the EU's single market and has criticized May for her
lack of compromise on Brexit. On Tuesday, Scotland's parliament
voted in favor of pursuing a second referendum on independence
(http://www.marketwatch.com/story/uk-government-snubs-scottish-parliament-vote-to-hold-new-independence-referendum-2017-03-28)
, though May has signaled a ballot won't take place before the
Brexit is settled.
Stock movers: Shares of BHP Billiton PLC (BLT.LN) (BHP.AU)
(BHP.AU) climbed 2.1% after the mining giant said it's considering
a new iron-ore investment
(http://www.marketwatch.com/story/bhp-billiton-looks-at-aussie-iron-ore-investment-2017-03-29)
in Australia.
In other mining news, Glencore PLC (GLEN.LN) (GLEN.LN) pushed
1.1% higher after saying its Australian coal mines weren't damaged
by Tropical Cyclone Debbie and that suspended work at mines should
restart soon.
Shares in energy companies were also rising, tracking gains for
oil prices. The gains for crude came on the back of supply
disruptions in Libya and hopes that the Organization of the
Petroleum Exporting Countries will extend its production cut.
Shares of BP PLC (BP.LN) (BP.LN) added 0.5% and Royal Dutch
Shell PLC (RDSB.LN) (RDSB.LN) gained 0.7%.
On a more downbeat note, shares of TUI AG dropped 0.8% after the
travel operator reaffirmed its fiscal 2017 guidance
(http://www.marketwatch.com/story/tui-reaffirms-growth-target-as-bookings-meet-views-2017-03-29),
but said macroeconomic and geopolitical challenges had affected
certain destinations.
(END) Dow Jones Newswires
March 29, 2017 04:30 ET (08:30 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
FTSE 100
Index Chart
From Apr 2024 to May 2024
FTSE 100
Index Chart
From May 2023 to May 2024