- FTSE 100 little changed
- Sterling takes a bath on forex markets as Brexit extension is ruled out
- Stress tests put the wind up UK banking shares
The threat of a no-deal Brexit has resurfaced and ended the party mood in London.
Although sterling has fallen sharply against the dollar following prime minister Boris Johnson’s pledge to rule out any extension to the Brexit deadline, this has not resulted in the usual boost for blue-chip equities.
Sterling was down by 1.39 cents at US$1.3196 against the US dollar but the FTSE 100 was more or less unchanged.
UK-focused banks were off the pace after the latest stress tests from the Bank of England.
The results, released after the close on Monday, showed that the UK banking system is “resilient to deep simultaneous recessions in the UK and global economies” and would be able to meet credit demand from UK business and consumers despite an economic crash, the central bank said.
8.40pm: Pause for breath
Having advanced around 250 points in two days, the index of blue-chips paused for breath.
Nudging 15 points higher in the first 30 minutes it subsided back to register virtually zero change.
The major action was on the foreign exchange markets where PM Johnson’s plan to exit the EU fully by 2020 pushed sterling below US$1.32 as traders became a little queasy about the prospect.
“That means no possible way to extend the transition period,” explained Neil Wilson, analyst at Markets.com.
“I must confess to believing he wouldn’t need to be so drastic, that a large majority offered the flexibility yet strength a government craves in deal making.
“This sets up another cliff-edge and could create yet more months of uncertainty for investors just when we thought all was squared away.”
The big mover on the stock market was Unilever (LON:ULVR) after the consumer goods firm lowered its sales targets. The shares shed more than 5%.
6.46am: FTSE 100 called lower
The FTSE 100 is expected to start lower on Tuesday as traders await new jobs figures to gauge the health of the UK economy.
Spread-better IG is expecting the FTSE 100 to open down 23 points after ending Monday’s session 166 points higher at 7,519.
Economists on average expect the unemployment rate to have picked up slightly to 3.9% in the three-month period to October from the recent 3.8%, while wage growth is forecast to have weakened.
“Wages will be the main thing to watch in this month’s labour market release,” said RBC Capital Markets, with average weekly wage growth seen easing to 3.4% from 3.6% for both the total and ex-bonus measures, with some predicting a rate of 3.3%.
Unemployment and wage figures will also be closely eyed in relation to inflation, due on Wednesday, and ahead of the Bank of England‘s interest rate decision on Thursday.
The employment data may also provide some movement catalysts for the pound, which was trading 0.32% lower at US$1.3286 following a recent surge in the wake of the Conservative Party’s victory in last week’s general election.
Lingering optimism over last weeks ‘phase-one’ trade deal signed between the US and China last week continued to lift US markets to record closes overnight as traders expected a reduction in existing tariffs between the two nations as well as the lack of any new ones.
The Dow ended Monday’s session up 100 points, or 0.36% at 28,236, while the S&P 500 climbed 23 points, or 0.7% to 3,191 and the Nasdaq jumped 79 points, or 0.9%, to 8.814.
Asian markets were given a boost by Wall Street’s record performance in addition to strong Chinese economic data, with the Japanese Nikkei 225 rising 0.47% while Hong Kong’s Hang Seng was 1.1% higher.
Significant announcements on Tuesday December 17:
Economic data: UK unemployment
Around the markets:
Sterling: US$1.3286, down 0.32%
Brent crude: US$65.40 a barrel, no change
Gold: US$1,477.10 an ounce, up 0.14%
Bitcoin: US$6,873.82, down 2.8%
Boris Johnson will redraw his Brexit bill this week to make it illegal for parliament to extend the transition period – Times
Regulators could bar savers who back Neil Woodford-style funds from accessing their cash instantly – or force them to take a big loss if they want the money right away – Telegraph
Boeing is temporarily halting production of its grounded 737 Max after the Federal Aviation Administration (FAA) said last week it would not approve the plane’s return to service before 2020 – Guardian
Two former Serco directors have been charged with fraud and false accounting over its electronic tagging scandal – Daily Mail