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Labour changes Brexit tack, FTSE lower

The FTSE is trading lower this morning as the political ground keeps shifting under the country’s feet. Jeremy Corbyn’s decision to back another EU referendum in response to pressures from his own party members and in light of recent defections on some level is making it harder to foresee what will happen over the next few days. While the decision adds strength to the Remain faction of Parliament and makes a second referendum a feasible next step it also has the potential to galvanize pro-Brexit MPs particularly on the Tory side of the House who could decide to vote in favour of Theresa May’s amended proposal which would still see Britain leave Europe by the end of March. 

The London gauge is trading 0.7% lower while the pound is weakening against the euro and flatlining against the dollar. 

Trade tensions pick up again

It is yet to be seen if it was too early to cheer about progress in the Sino-US trade dispute as conflicting signals are coming from politicians and negotiators about what has been achieved during recent talks. While President Trump seemed fairly upbeat recently about the way the talks shaped up lead US negotiator Robert Lighthizer struck a far more cautious note saying the issues between the two sides are too serious to be resolved with promises that China would buy more US goods. Stock markets responded with renewed cautiousness, particularly in Asia, but European stocks were not spared either. 

Asian tensions brewing 

Tensions between nuclear powers India and Pakistan are escalating after both sides shot down one another’s planes in a rising dispute over Kashmir. For the time being the building hostilities are having only a marginal impact on Asian markets but if the conflict continues to escalate it could have major implication on commodities and stock markets. 

It would be not only phenomenally damaging to both countries but would also be divisive for the region as Asian countries would align differently behind the two. Not least, the conflict could draw in China which has traditionally been hostile to India and supportive of Pakistan, and could force it to take a step that would provoke a reaction from the West. 

Some of the major Indian conglomerates are listed on Western bourses or have ownership links that reach deep into the UK economy such as Tata Motors, the owner of Rolls Royce, which is trading down 4% this morning. Gold and silver prices could also feel the brunt of an escalating dispute as the two countries are among the biggest buyers of the two precious metals.
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