Pound wobbles as British PM says get ready for ‘no-deal’ Brexit

October 16, 2020: The British pound wobbled Friday, boosting London stocks, after UK Prime Minister Boris Johnson warned he was ready to walk away from European Union trade talks and prepare for a “no-deal” Brexit.

Sterling fell below $1.29 before crawling back after Johnson accused the EU of failing to negotiate seriously — and declared Britain should “get ready” for an Australia-style agreement based on World Trade Organization rules from January “unless there is a fundamental change of approach” from Brussels.

A Johnson aide ramped up the rhetoric by adding that trade talks were over unless Brussels “fundamentally shifts its position.”

Their comments came after an EU summit this week demanded Britain urgently give ground on fair trade rules to unblock post-Brexit negotiations.

“Sterling fell sharply on comments from PM Boris Johnson calling for the UK to prepare for a no-deal exit in January and accusing the EU of not negotiating seriously,” said Markets.com analyst Neil Wilson.

Analyst Craig Erlam at Oanda commented that “I think the market is broadly taking it for what it is, one final push at concessions from the EU.”

But he added: “It would be terrible for all of this to end without a deal after four years of work and in the midst of a pandemic when businesses are already pushed to the brink.”

Johnson's comments helped propel the London stock market 1.5 percent higher at the close, while on Wall Street the Dow had risen 0.8 percent two hours into the session, with the tech rich Nasdaq up 0.3 percent.

A weak pound lifts the share prices of companies listed on the FTSE 100 index that generate a large proportion of their income in dollars.

– Virus restrictions cloud outlook –

“A weak pound has been good for the multinationals on the FTSE 100, while some better earnings have lent support to European stocks” overall, said Rabobank analyst Jane Foley.

“However, fresh Covid-19 restrictions continue to cloud the outlook,” she told AFP.

In the eurozone, Frankfurt's main stocks index closed 1.6 percent higher, with industrial giant Thyssenkrupp closing up 10.8 percent after British rival Liberty made an informal, but undisclosed bid for its steel activities.

“As long as Wall Street holds up there shouldn't be a DAX correction,” ventured Jochen Stanzl of CMC Markets.

Paris gained 2.0 percent despite a looming coronavirus curfew in the French capital.

Oil prices recoiled on stubborn energy demand fears ahead of a meeting of key crude producers next week.

Traders were keeping tabs also on developments in Washington as lawmakers struggle to find agreement on a new stimulus for the beleaguered US economy, with a disappointing jobs report highlighting the need for action.

Additionally, while September US retail sales came in above expectations industrial production contracted 0.6 percent, below forecasts of 0.5 percent growth

With polling showing him well behind in the White House race, President Donald Trump said he was open to a bigger stimulus than the $1.8 trillion offered last week, as he seeks to close the gap with Joe Biden.

AFP/APP

Posted on: 2020-10-17T00:30:00+05:00

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