London, Feb 26: Stock markets advanced Tuesday on the US Federal Reserve's message it would be “patient” before moving interest rates again, while London equities were hurt by a rally in the British pound on speculation over a possible Brexit delay.
Markets had hurtled higher Monday after US President Donald Trump said he would delay a hike in tariffs on Chinese goods and described the two countries as being in “advanced stages” of negotiations towards a deal.
Asian markets were seized by doubts over whether Beijing and Washington can resolve their bitter trade war.
European markets were similarly hit in early trading, but rebounded in afternoon trading as Federal Reserve boss Jerome Powell spoke to US lawmakers.
Powell remained upbeat about the economic outlook, but said the Fed will be “patient” before making any further changes in the benchmark borrowing rate.
The rebound in equity markets in the past two months has largely been due to the Fed abandoning, in the face of growing concern about global economic growth, a policy that would have seen it continue to raise interest rates this year.
Higher interest rates make it more expensive for companies to borrow, so keeping them on pause is positive for stocks.
– Building Brexit tensions –
In London on Tuesday, sterling rose as Prime Minister Theresa May promised to allow parliament to delay Brexit by up to three months so that Britain would not crash out of the European Union without a deal on the scheduled departure date of March 29.
In reaction, the pound leapt to $1.3284 — the highest level since October.
And the European single currency hit its highest level against the pound since May 2017 at 85.63 pence.
Adding upside to sterling was the announcement by opposition leader Jeremy Corbyn that his Labour Party would support a second referendum on leaving the bloc if its own plan for Brexit is not approved.
The stronger pound weighed on London's FTSE-100, which contains many multinationals whose earnings abroad are converted back into sterling.
“The FTSE 100 continues to underperform its mainland European peers, as yet another surge in sterling dragged the internationally focused index into the red,” said IG market analyst Josh Mahony.
– Key figures around 1630 GMT –
- Pound/dollar: UP at $1.3258 from $1.3097
- Euro/pound: DOWN at 85.73 pence from 86.72 pence
- Euro/dollar: UP at $1.1367 from $1.1358 at 2200 GMT
- Dollar/yen: DOWN at 110.75 yen from 111.06 yen
- London – FTSE 100: DOWN 0.5 percent at 7,151.12 points (close)
- Frankfurt – DAX 30: UP 0.3 percent at 11,540.79 (close)
- Paris – CAC 40: UP 0.1 percent at 5,238.72 (close)
- EURO STOXX 50: UP 0.4 percent at 3,292.65
- New York – Dow: UP 0.05 percent at 26,104.59
- Tokyo – Nikkei 225: DOWN 0.4 percent at 21,449.39 (close)
- Shanghai – Composite: DOWN 0.7 percent at 2,941.52 (close)
- Hong Kong – Hang Seng: DOWN 0.7 percent at 28,772.06 (close)
- Oil – Brent Crude: UP 78 cents at $65.54 per barrel
- Oil – West Texas Intermediate: 44 cents at $55.92