British pound rallies on May's Brexit setback

British pound rallies on May's Brexit setback

British pound
The British pound fell against the euro and dollar on Oct 14, the start of a pivotal week for Britain and the European Union to strike a Brexit deal. (AFP/PAUL ELLIS)

LONDON: The British pound rallied on Tuesday (Jan 15) after the lower house of parliament overwhelmingly rejected Prime Minister Theresa May's Brexit plan, while global stocks climbed.

The pound's surge after the lopsided vote suggested traders still viewed a so-called "hard Brexit" - one with no agreement between the EU and Britain - as a remote possibility.

US stocks pulled back somewhat after the British vote tally but quickly recovered to join stock markets in Europe and Asia in moving higher following news that China planned tax cuts to boost the economy.

Near 2140 GMT, the pound stood at 88.66 pence to the euro, compared with 89.57 and 89.15 Monday night.

Against the dollar, the pound traded at US$1.2871 against US$1.2704 and US$1.2864 Monday night.

The House of Commons voted 432 to 202 against May's plan for taking Britain out of the European Union, one of the biggest defeats ever suffered by a British prime minister.

The negative vote had been expected but the margin was much bigger than May had hoped. Ahead of the vote, some analysts had predicted the pound could plunge with a one-sided defeat, such as 200 votes or more.

BK Asset Management's Boris Schlossberg said investors simply did not believe there was a realistic chance of a so-called "hard" Brexit.

"Markets project beliefs and the underlying belief is that nobody's going to be committing economic suicide," he said.

Jeremy Stretch, head of Group-of-10 currency strategy at Canadian Imperial Bank of Commerce, told Bloomberg the outcome boosted the odds of a delay, a second referendum or even no Brexit at all.

Earlier European stock markets enjoyed cautious gains after Asia swung higher as worries dimmed over a global economic slowdown and Wall Street posted modest gains in the late New York morning.

Asian equity markets rebounded from the previous day's sharp losses, with Hong Kong and Shanghai lifted by Chinese plans to slash taxes to boost the economy.

US stocks also pushed higher, brushing aside mixed banking earnings and an ongoing government shutdown.

Among individual companies, Netflix surged 6.5 per cent after announcing price hikes, including raising the cost of its most popular monthly plan to US$13 from US$11.

The good mood helped lift the tech sector generally. Google-parent Alphabet and Microsoft each rose about three per cent. Apple rose 2.1 per cent.

Key figures around 2140 GMT:

Pound/dollar: DOWN at US$1.2871 from US$1.2864 at 2200 GMT on Monday

Euro/pound: UP at 88.66 pence from 89.15 pence

Euro/dollar: DOWN at US$1.1413 from US$1.1469

Dollar/yen: UP at 108.72 yen from 108.16

New York - Dow: UP 0.7 per cent at 24,065.59 (close)

New York - S&P 500: UP 1.1 per cent at 2,610.30 (close)

New York - Nasdaq: UP 1.7 per cent at 7,023.83 (close)

London - FTSE 100: UP 0.6 per cent at 6,895.02 points (close)

Frankfurt - DAX 30: UP 0.3 per cent at 10,891.79 (close)

Paris - CAC 40: UP 0.5 per cent at 4,786.17 (close)

EURO STOXX 50: UP 0.4 per cent at 3,068.05

Tokyo - Nikkei 225: UP 1.0 per cent at 20,555.29 (close)

Hong Kong - Hang Seng: UP 2.0 per cent at 26,830.29 (close)

Shanghai - Composite: UP 1.4 per cent at 2,570.34 (close)

Oil - Brent Crude: UP US$1.65 at US$60.44 per barrel

Oil - West Texas Intermediate: UP US$1.60 at US$52.11 per barrel

Source: AFP/de

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