Stocks, pound stumble after warning on no-deal Brexit

NEW YORK – Stock markets and the pound stumbled yesterday after London and Brussels warned that a no-deal Brexit is now a strong possibility.

When closing bells rang, London stocks fell by a collective 0.8%, while Frankfurt gave up 1.4% and Paris was off by 0.8%.

Wall Street also saw a lacklustre day, with both the S&P 500 and Nasdaq retreating, even as the Dow eked out a gain.

“We are starting to see the first meaningful de-risking from investors amid concern over Brexit,” said Stephen Innes, chief global markets strategist at Axi.

Rabobank analyst Jane Foley added: “In the past few weeks, the market consensus has gone from being reasonably confident that the European Union and the UK would agree on a skinny deal, to fearing that no deal may now be the mostly likely outcome.”

EU chief Ursula von der Leyen has told the bloc’s leaders that there are “low expectations” that a post-Brexit trade deal could be struck with Britain, said EU sources.

The clock is ticking down to the latest deadline – tomorrow – to make a call on prolonging negotiations or give up.

British Prime Minister Boris Johnson said the chances of not reaching a deal are “very, very likely”, in which case, Britain will trade with the EU on terms established by the World Trade Organisation.

Talks continued yesterday between EU and British negotiators, but they are struggling to break deadlocks on issues that include fishing rights and fair trade regulations.

The possibility that Britain will leave the EU without a deal weighed on the pound sterling, as investors contemplated cross-Channel trade being subjected to tariffs and quotas from January 1.

The Bank of England yesterday said financial services face “some disruption” when the deadline passes, but added that UK commercial lenders – already dealing with the effects of the coronavirus pandemic – are well-prepared.

Key figures around 2220 GMT

New York – Dow: Up 0.2% at 30,046.37 (close)

New York – S&P 500: Down 0.1% at 3,663.46 (close)

New York – Nasdaq: Down 0.2% at 12,377.87 (close)

London – FTSE 100: Down 0.8% at 6,546.75 (close)

Frankfurt – DAX 30: Down 1.4% at 13,114.30 (close)

Paris – CAC 40: Down 0.8% at 5,507.55 (close)

Euro Stoxx 50: Down 1.0% at 3,485.84 (close)

Tokyo – Nikkei 225: Down 0.4% at 26,652.52 (close)

Hong Kong – Hang Seng: Up 0.4% at 26,505.87 (close)

Shanghai – Composite: Down 0.8% at 3,347.19 (close)

Pound/dollar: Down at US$1.3229 from US$1.3295

Euro/pound: Up at 91.55 pence from 91.29 pence

Euro/dollar: Down at US$1.2118 from US$1.2138

Dollar/yen: Down at ¥104.01 from ¥104.24

West Texas Intermediate: Down 0.4% at US$46.57 per barrel

Brent North Sea crude: Down 0.6% at US$49.97 per barrel. – AFP, December 12, 2020