FTSE Lags Peers As GBP Recovery Continues, Boris Loses More Votes
XTB | Sep 05, 2019 12:22
The leading UK stock benchmark is standing out like a sore thumb this morning, with the FTSE trading in negative territory while many of its peers are enjoying another leg higher. The Euro Stoxx 50 and US stock futures are both trading at their highest level in just over a month and after a tumultuous August, investors may now be starting to feel that the worst of it is behind them and begin to hope for further upside ahead.
Pound gains as Boris loses more votes
The cause of this divergence is a further recovery in the pound with sterling now trading around 3% higher than Tuesday’s low against the USD, and quite remarkably the currency has now recouped around a quarter of the declines seen since the high seen at the start of May.
The last couple of days since parliament returned from its summer recess have been dramatic, even against the high bar set by UK politics in recent years. After making his move last week by proroguing parliament, Boris Johnson is now on the back foot once more after MPs have voted to pass a bill that essentially significantly reduces the threat of a no-deal Brexit and thus renders his negotiating position with the EU as far weaker - at least in his own eyes.
Furthermore, attempts to call a GE are being frustrated by parliament with his attempts last night beaten by a vote of 327-299. Mr Johnson is expected to use a speech today to challenge Labour leader to a General Election and while this will likely occur, Jeremy Corbyn wants to remove the threat of a no-deal before agreeing. As is often the case with Brexit there’s a lot of moving parts here, with numerous side-stories and subplots, but the key thing as far as the markets are concerned is that the prospect of no deal is receding once more and this has caused the bounce we’ve seen in sterling.
Equities rise on trade hopes
While we’ve not felt the positive impact here in London as elsewhere, there has been another clear move higher in most global stock indices after reports that the US and China are set to resume trade talks next month.
These stories have been confirmed both by Washington and Beijing and even though they amount to little more hopeful remarks at present the market reaction is quite telling. The ability to look through clear negative news (such as the imposition of additional levies) and focus on the positives (such as hopeful remarks on trade), is a pleasing attribute for stock market bulls and also, often a characteristic of many a stock market rally.
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