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London equities take a pounding as Britain may delay Brexit

London equities take a pounding as Britain may delay Brexit

FILE PHOTO: Pedestrians leave and enter the London Stock Exchange. (REUTERS/Neil Hall)

LONDON: Stock markets advanced on Tuesday (Feb 26) 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 on 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 Mar 29.

In reaction, the pound leapt to US$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 US$1.3258 from US$1.3097

Euro/pound: DOWN at 85.73 pence from 86.72 pence

Euro/dollar: UP at US$1.1367 from US$1.1358 at 2200 GMT

Dollar/yen: DOWN at 110.75 yen from 111.06 yen

 

London - FTSE 100: DOWN 0.5 per cent at 7,151.12 points (close)

Frankfurt - DAX 30: UP 0.3 per cent at 11,540.79 (close)

Paris - CAC 40: UP 0.1 per cent at 5,238.72 (close)

EURO STOXX 50: UP 0.4 per cent at 3,292.65

New York - Dow: UP 0.05 per cent at 26,104.59

 

Tokyo - Nikkei 225: DOWN 0.4 per cent at 21,449.39 (close)

Shanghai - Composite: DOWN 0.7 per cent at 2,941.52 (close)

Hong Kong - Hang Seng: DOWN 0.7 per cent at 28,772.06 (close)

 

Oil - Brent Crude: UP 78 cents at US$65.54 per barrel

Oil - West Texas Intermediate: UP 44 cents at US$55.92 per barrel

Source: AFP/de

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