An outbreak of bullish sentiment in the UK is mostly limited to Sterling, as worrying signals from the U.S. Treasury keeps global Shares under pressure. British Shares, at least the top tier of the market, are orientated more to hints of recession from U.S. market yields as well. At the same time, the pace at which Sterling regains tone is also keeping blue-chip buyers away. The market is now downplaying dark implications from a potential constitutional crisis. Instead, focus is increasingly on the possibility that an historic government contempt ruling, and a dizzying host of further developments could prevent Brexit happening at all.
How this affects our Brexit Top 10 markets:
GBP/USD: Cable was the main beneficiary for much of the day before a fade set in. Much scepticism remains about the chances that Brexit might not happen, or indeed, if it does happen, that the UK can stage a smooth exit.
GBP/JPY: Sterling’s most volatile major pair maintained a 0.6% rise at last check, though was well below the day’s best.
EUR/USD: The euro struggled despite darkening clouds for the dollar. Eurozone rates paint almost as worrying a cloud for the region’s economy as Treasury yields do for the U.S.
EUR/GBP: Sterling’s bounce was evident sending pair to an 88.72p two-day low. The euro eventually rallied as the spike in optimism about Brexit faded.
UK 100: The FTSE is the closest proxy to the U..S. dollar among UK indices, hence it struggled on Wednesday. Sterling staging its biggest jump since late November also weighed on blue-chip stocks.
Germany 30: The DAX reflects a more balanced mixture of global sentiment and Brexit-related mood. It will remain close to the year’s lows unless a more promising read of the global outlook emerges.
Lloyds: Britain’s biggest domestically focused bank has a lot riding on Brexit. At the same time market rates have plunged to six-month lows as the economy slows. Lloyds rose 2% today but with investors having second thoughts late in the session, the stock could well lose that advance later in the week.
Barclays: More internationally focused Barclays also rose, but less, given less exposure to Brexit and more to U.S. yields.
Shell: The heaviest weight in the FTSE kept the British market in the red ahead of Thursday’s OPEC meeting, the outcome of which remains uncertain.
BP: BP has somewhat further to fall than Shell as it remains moderately higher in 2018. That makes it more prone to selling when geopolitical or oil market pressures rise.
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