London’s stock market rose as the pound fell yesterday, with investors reacting to Brexit-facing data and Bank of England contingency measures ahead of fresh divorce-deal talks in Brussels.
London’s FTSE 100 was up 0.2 per cent in afternoon trading, helped by a drop in the pound that lifted share prices of multinationals listed on the benchmark index.
Eurozone indices steadied, while most Asian stocks closed lower.
The pound retreated as hiring by companies dropped at the fastest pace in seven years amid Brexit uncertainty, though other data showed output in Britain’s key services sector increased slightly in February.
The Markit/CIPS services survey rebounded to 51.3 in February from a 29-month low of 50.1 in January.
Meanwhile, the EU’s chief Brexit negotiator Michel Barnier met Britain’s negotiating team as both sides seek a breakthrough with just weeks to go before this month’s looming divorce deadline.
The Bank of England warned that Europe’s financial system faced “potential risks” to its stability from a no-deal Brexit, as it extended weekly lending facilities to include euros.
The BoE warned that some disruption to cross-border services is possible and, in the absence of other actions by EU authorities, some potential risks to financial stability remain.
Earlier in the day, most Asian stock markets retreated as investors awaited fresh developments in the China-US trade talks, though Shanghai closed higher as China unveiled massive tax cuts to support the stuttering economy.
Wall Street provided a negative lead on Monday as optimism that the world's top two economies were heading for a tariffs deal was replaced by a need for clarity on any agreement.
Shares have enjoyed a blockbuster start to the year, but “trade optimism could only take the stock market so far”, said Oanda senior market analyst Alfonso Esparza.
Tokyo ended 0.4 per cent lower, Sydney eased 0.3 per cent, Singapore and Seoul were each 0.5 per cent off and Taipei dropped 0.4 per cent. Manila and Bangkok were also down. But Shanghai jumped 0.9 per cent while Hong Kong inched up after China announced hundreds of billions of dollars worth of tax cuts for firms to stimulate the economy.
Beijing will also increase spending, with the targeted fiscal deficit set to increase to 2.8 per cent of GDP, from 2.6 per cent last year, while the National People’s Congress is expected to pass laws next week regulating foreign investment in a move that could help ease US trade tensions.
However, it did reveal a target of 6.0-6.5 per cent growth for this year ‒ below the last year’s 6.6 per cent, the slowest for three decades ‒ as Chinese leaders struggle to address a mounting debt crisis as well as the trade row.