Markets chew on Brexit delay

The implications of a potential delay in Brexit and the pound’s new found strength are working against the FTSE this morning and even though several blue chips like ITV, Weir Group and homebuilder Taylor Wimpey turned in good results, this was not enough to stem the tide.

As of yesterday the Prime Minister has agreed that MPs will be able to vote on delaying Britain’s departure from the EU if they decide to reject the revised Brexit proposal she is currently working on. She cited the fact that businesses and government are seriously unprepared for a hard Brexit as one of her main reasons for the proposal. 

While the delay helps avoid some of the consequences of an abrupt departure from the EU it also is keeping industry in a sort of limbo that doesn’t allow for long term planning and hampers a number of business decisions. Brexit could end up being delayed until 2021, which, for a lot of businesses will mean operating with one hand tied behind their backs for another two years.

Investors take dim view of M&S’s Ocado deal

Marks & Spencer has finally initiated the process of branching off into online sales and deliveries with the purchase of Ocado. The supermarket chain will take over from Waitrose as Ocado’s main partner in September 2020 when the Waitrose deal runs out.

Strategically it is a smart move in a situation when high street sales for most UK supermarkets have been losing ground to online sales. But M&S’s decision comes with a hefty price tag of £750 million. 

To raise that money the supermarket chain will launch a £600 million rights issue and cut the dividend payout by 40%. Investors were less than positive on the details of the deal, punishing the company with an 8% decline in share price.

Oil and currencies steady

Yesterday’s onslaught on oil futures seems to have petered out and prices stabilized this morning for both Brent crude and WTI. Some major headwinds remain in place with President Trump calling on OPEC to relax production because prices are too high in his view, but the prospect of a Sino-US trade deal is pushing the market in the opposite direction because it could help boost the Chinese economy and consequently oil demand. 

The currency markets are also slightly less volatile this morning with the pound rising 0.14% against the dollar on the back of domestic Brexit news.