Shares spooked on UK crash-out fear
Some UK shares were rattled as investors contemplated the latest political set-piece at Westminster in the countdown to Brexit.
The pound rose off three-week lows against the dollar as UK prime minister Theresa May said the British government would seek to speed up ratification of its Brexit withdrawal deal with the EU if time gets too tight.
But fears about a crash-out Brexit at the end of next month have resurfaced in stock markets, said Chris Beauchamp at online broker IG. “Reports of the PM [Theresa May] heading towards a no deal have been sufficient to spook investors,” he said, citing a warning by travel firm TUI “at a time when markets are already worried about the resilience of the UK economy”.
“Holding our nerve’ appears to be the new approach to get a deal, but a great game of chicken seems to be an unpromising way to conduct global affairs,” he said.
Time is running out for Ms May to persuade the EU to amend the Brexit deal and then get MPs to approve it, before Britain is scheduled to leave the EU on March 29. The deadlock and delays over the terms of Brexit have heightened fears among financial investors of a no-deal and disorderly, economically disruptive departure even if the majority of MPs want to avoid one.
Ms May told MPs to hold their nerve over Brexit and give her more time to negotiate a deal acceptable to both the EU and the British parliament.
She also said that parliament, which last month resoundingly rejected her accord for satisfying neither pro-Brexit MPs’ wish for a clean break nor pro-EU lawmakers’ call for continued close ties, would not vote on a revised deal this week.
British media have reported a fresh vote is not expected until later this month at the earliest.
“Further delay is unlikely to be welcomed by business. However, the UK prime minister appears determined to push her deal to the wire, given the lack of a parliamentary majority for any other options,” said Michael Hewson, analyst at CMC Markets. Against the euro, sterling was little changed at 87.69 pence.
Analysts noted that the price of buying options to protect against further volatility in the pound had fallen in recent days.
“The recent bigger picture is still that market participants are actively pursuing downside protection,” said Lee Hardman, currencies analyst at MUFG said.
He said that sterling markets remained relatively calm, reflecting confidence that Britain would avoid a chaotic exit from the EU. But as the clock ticks down, that optimism is likely to fade, Mr Hardman noted.
