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British stocks slide amid political turmoil of Brexit



  Dealer in the City

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The British stock market has reversed in the wake of political conflict from Theresa May's Brexit plan.

The FTSE 100 stock index fell 0.7% to 6,987.88, while stocks in UK-focused stocks such as banks and home builders continued to decline.

The pound, which suffered the biggest slump on Thursday for two years, has stabilized.

The pound rose 0.8% y / y The dollar rose to $ 1

.2873, while it rose 0.2% against the euro to $ 1.1297.

What happened to the pound?

Although the Prime Minister announced on Wednesday that she had received Cabinet support for the draft Brexit agreement with Brussels, the resignations of Brexit Secretary of State Dominic Raab and Labor and Pension Minister Esther McVey on Thursday shook the markets.

On Thursday, the pound posted its highest volatility since the referendum in June 2016, when it fell 1.9% against the dollar and the dollar by 1.7%.

Without further resignations, the pound stabilized on Friday morning. However, the stability is unlikely to last, according to the analysts.

"As long as" no deal "is as likely as it is, there is the danger of a self-reinforcing devaluation spiral of sterling," said the foreigner Ulrich Leuchtmannan exchange strategist at Commerzbank.

"The Sterling's volatility has woken from its 100-year sleep and is likely to remain reactive."

Why does the sterling fall on the Brexit nerves?

Laith Khalaf, Senior Analyst at Hargreaves Lansdown said the pound is a barometer of the outlook for the UK economy.

"Every time we see the likelihood of poor Brexit risk … the currency goes by," Khalaf said.

pounds on Thursday, which was the largest percentage decline in the currency since the June 2016 EU exit vote, when the pound fell 9.1% against the dollar.

This move was even greater than the slump on October 21, 2008, when the then Governor of the Bank of England. Mervyn King said the financial crisis meant the UK economy was entering a recession.

CCLA Investment Management Chief Investment Officer James Bevan told BBC's Today program that there are some "interesting fundamentals" for the pound.

Including slower economic growth in the UK than in the EU and US, which means that UK interest rates may not rise as fast as in other parts of the world. This makes the pound less attractive to investors.

What happens to the stock market?

The FTSE 100 stock index fell ground on Friday afternoon, dropping 0.8% to 6,982.85 in the early afternoon, while the FTSE 250 – which is widely regarded as a closer barometer of the UK economy – fell around 0, 5% to 18,564 points.

Mr. Khalaf said the index of the 100 largest public companies in the stock market has been protected from major declines by companies with large international activities.

"If you look at the headline The market, the benchmark index, has not really moved," said Khalaf.

For example, the largest companies of the index, Shell and HSBC, both have large foreign operations that generate revenues in currencies such as dollars and euros, which are worth more as the pound goes down.

What happens to individual stock prices?

On Thursday, stocks of companies that are heavily exposed in the UK economy posted the biggest declines, with home construction companies and banks involved particularly hard hit. The Royal Bank of Scotland lost 9%, while the real estate companies Persimmon, Taylor Wimpey and Barratt Developments fell by about 7%.

RBS shares declined nearly 5% on Friday, reaching their lowest level in a year. [19659005UnderHausbauernstankenPersimmonandBarrettum1%whileTaylorWimpeyum05%fell

Mr Khalaf calls such companies "Brexit beasts" – those more closely linked to the British economy.

He cited the example of the Lloyds Banking Group, which made a loss in 2011 and now makes billions of profits but trades at a lower stock price.

The RBS is also struck by the possibility that there was a general election and the The Labor Party took power, the bank could be completely nationalized.

What do the companies say?

Large companies have generally supported the draft Brexit agreement published on Wednesday.

Warren East, chief executive of engineering company Rolls-Royce, told the Today program that time was running out and every deal was better than leaving the EU without a deal.

"As an economic leader, I would like to see politicians on both sides of the fence and negotiate a practical deal that works for the economy," he said.

The eyes are on companies like Rolls-Royce, which have a "Just- Operate in-time "model, where parts from across the EU arrive in the UK when needed.

The head of the cooperative The group has warned that the availability of fresh food from both the UK and abroad could be affected by a no-deal brexit.

Steve Murrells told BBC Radio 5 live that stockpiling was not an option as "there are not enough cooled capacities".


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