LONDON: The pound fell to levels not seen in over two years on Monday (Jul 29) as a no-deal Brexit seemed ever more likely, while London stocks surged thanks to bubbling takeover activity.
"The British pound started weakening sharply today, with the market awaking to the reality of a new UK government, its rather combative stance on the current EU-UK Brexit deal and its open remarks on the rising probability of a no deal Brexit," said ING strategist Petr Krpata.
Calling the fall a "meltdown", Krpata said sterling's woes were unlikely to be over, as "politics should remain the key negative for sterling in the months to come".
Monday's level in terms of the dollar was the worst since March 2017.
Prime Minister Boris Johnson has vowed to lead Britain out of the EU on Oct 31 even if this means doing so without a divorce agreement.
On Monday he urged EU leaders to drop their opposition to renegotiating Brexit.
"The pound has gotten off on the wrong foot at the start of the new week," said XTB analyst David Cheetham. "Brexit continues to be the dominant theme with a noticeable harshening of the rhetoric in recent days raising concerns amongst traders."
London stocks, meanwhile rallied on corporate takeover news, with the FTSE 100 benchmark index of major blue-chip companies adding nearly two per cent, vastly outperforming eurozone peers which ended on a softer note.
Britain's Just Eat and Takeaway.com of the Netherlands unveiled a plan to join forces to create a heavyweight in the rapidly-growing food delivery sector with around US$8 billion in annual sales.
The combination of the two firms would create a delivery platform worth around US$11 billion capable of competing against Britain-based Deliveroo and Uber Eats of the United States with a strong presence in Britain, Canada, Germany and the Netherlands.
The news sent Just Eat's share price rocketing by over a quarter, topping the FTSE 100 risers board.
The second biggest gainer was the London Stock Exchange itself after it confirmed talks over a massive US$27-billion takeover of US financial data provider Refinitiv, a move that would place it in direct competition with Bloomberg.
The takeover, which is worth the equivalent of €24 billion (US$26.7 billion) and marks a major switch in strategy under LSE CEO David Schwimmer, sent shares briefly spiking to a record.
The FTSE was also buoyed by the weak pound, which hands a major boost to exporters.
"The FTSE is powering ahead ... on merger and takeover news, shrugging off a weak session in Asia where the start of Sino-US trade talks in Shanghai dominated trading sentiment," said City Index analyst Fiona Cincotta.
In Paris, Peugeot shares were sharply weaker after chief executive Carlos Tavares told the Financial Times that he would be forced to shut a UK facility if market conditions turned "bad" as a result of a problematic EU departure.
On Wall Street, the Dow Jones index was steady approaching midday in New York as investors awaited a key Federal Reserve rate decision this week, but the wider S&P 500 and the tech-heavy Nasdaq were both down.
US markets are looking at a news-heavy week, which also includes Apple results and the resumption of US-China trade talks.
Key figures around 1540 GMT:
London - FTSE 100: UP 1.8 per cent at 7,686.61 points (close)
Frankfurt - DAX 30: FLAT at 12,417.47 (close)
Paris - CAC 40: DOWN 0.2 per cent at 5,601.10 (close)
EURO STOXX 50: FLAT at 3,523.58
Pound/dollar: DOWN at US1.2221 from US$1.2384 at 2100 GMT
Euro/pound: UP at 91.12 pence from 89.86 pence
Euro/dollar: UP at US$1.1135 from US$1.1128
Dollar/yen: UP at 108.88 yen from 108.68 yen
Tokyo - Nikkei 225: DOWN 0.2 per cent at 21,616.80 (close)
Hong Kong - Hang Seng: DOWN 1.0 per cent at 28,106.41 (close)
Shanghai - Composite: DOWN 0.2 per cent at 2,941.99 (close)
Brent North Sea crude: UP 3 cents at US$63.40 per barrel
West Texas Intermediate: UP 9 cents at US$56.29 per barrel