December 12, 2020: Stock markets and the pound stumbled Friday after London and Brussels warned that a no-deal Brexit was now a strong possibility.
When closing bells rang, London stocks had fallen by a collective 0.8 percent, while Frankfurt gave up 1.4 percent and Paris was off by 0.8 percent.
Wall Street also had a lackluster day, with both the S&P 500 and Nasdaq retreating even as the Dow eked out a gain.
“We are starting to see the first meaningful de-risking from investors amid concern over Brexit,” remarked Stephen Innes, chief global markets strategist at AXI.
Rabobank analyst Jane Foley added: “In the past few weeks, the market consensus has gone from being reasonably confident that the EU and the UK would agree on a skinny deal to fearing that no deal may now be the mostly likely outcome.”
– 'Low expectations' –
EU chief Ursula von der Leyen has told the bloc's leaders there were “low expectations” that a post-Brexit trade deal could be struck with Britain, EU sources said.
The clock was ticking down to the latest deadline, on Sunday, to make a call on prolonging negotiations or give up.
British Prime Minister Boris Johnson said the chances of not reaching a deal were “very, very likely”, in which case Britain would trade with the EU on terms established by the World Trade Organization.
Talks continued Friday between EU and British negotiators but they were struggling to break deadlocks on issues that included fishing rights and fair trade regulations.
The possibility that Britain will leave the EU without a deal weighed on pound sterling as investors contemplated cross-Channel trade being subject to tariffs and quotas from January 1.
The Bank of England said Friday that financial services faced “some disruption” when the deadline passes, but added that UK commercial lenders — already dealing with effects of the coronavirus pandemic — were well-prepared.
Back in the United States, analysts cited disappointment at the lack of progress in congressional stimulus talks as a factor in the market's sluggish performance.
The US Senate approved a one-week budget stopgap that avoids a government shutdown, but the outlook for a long-awaited coronavirus relief package, without which analysts fear a renewed downturn in economic activity, remained uncertain.
Among individual stocks, Disney jumped 13.6 percent after reporting that the company's year-old streaming TV service Disney+ had passed 86.8 million subscribers, beating its “wildest expectations,” the company's CEO said.
The growth in Disney+ has helped offset weakness in other company businesses during the pandemic, especially theme parks.
– Key figures around 2220 GMT –
- New York – Dow: UP 0.2 percent at 30,046.37 (close)
- New York – S&P 500: DOWN 0.1 percent at 3,663.46 (close)
- New York – Nasdaq: DOWN 0.2 percent at 12,377.87 (close)
- London – FTSE 100: DOWN 0.8 percent at 6,546.75 (close)
- Frankfurt – DAX 30: DOWN 1.4 percent at 13,114.30 (close)
- Paris – CAC 40: DOWN 0.8 percent at 5,507.55 (close)
- EURO STOXX 50: DOWN 1.0 percent at 3,485.84 (close)
- Tokyo – Nikkei 225: DOWN 0.4 percent at 26,652.52 (close)
- Hong Kong – Hang Seng: UP 0.4 percent at 26,505.87 (close)
- Shanghai – Composite: DOWN 0.8 percent at 3,347.19 (close)
- Pound/dollar: DOWN at $1.3229 from $1.3295 at 2200 GMT
- Euro/pound: UP at 91.55 pence from 91.29 pence
- Euro/dollar: DOWN at $1.2118 from $1.2138
- Dollar/yen: DOWN at 104.01 yen from 104.24 yen
- West Texas Intermediate: DOWN 0.4 percent at $46.57 per barrel
- Brent North Sea crude: DOWN 0.6 percent at $49.97 per barrel.