Global stocks, sterling lifted by ‘long-awaited’ Brexit deal

Oil falls on inventory rise and demand worries

LONDON/NEW YORK, Oct 17, (RTRS): A deal on Britain’s departure agreed with the European Union sent sterling to a five-month high on Thursday and hoisted European stocks to a year-and-ahalf peak before doubts about UK parliamentary support hauled them back.

Wall Street rose as upbeat earnings from Netflix and Morgan Stanley affirmed a strong start to the US reporting season while the dollar fell against the euro as the common currency got a lift on the long-awaited Brexit deal. Sterling, the key gauge of Brexit sentiment all along, jumped as much as a 1% against the dollar, putting it on course for its best six-day gain in more than 30 years before the doubts and grumbles set in.

Market optimism faltered when the Northern Ireland party said it could not support the agreement, torpedoing hopes of a smooth passage through parliament.

Having ran up as far as $1.2988, sterling fell well under $1.28 before regaining momentum to trade at $1.2857, up 0.21% on the day.

London’s benchmark FTSE index jumped 0.61% as the pound slid but the broad-market pan-European STOXX 600 lost most of its gains, rising 0.17%. The FTSEurofirst index of leading regional shares rose 0.17%.

UK Gilts, German Bunds, gold and most other safe havens also rebounded after selling off.

Netflix Inc shares rose 2.3% in heavy trade after the video streaming service provider added slightly more paying subscribers than Wall Street expected in the third quarter.

Morgan Stanley gained 3.1% after the big lender beat analysts’ expectations for quarterly profit, buoyed by higher revenue from bond trading and M&A advisory fees.

Earnings season is dictating US market moves, which has historically been the case, said Kristina Hooper, chief global market strategist at Invesco.

The Dow Jones Industrial Average rose 48 points, or 0.18%, to 27,049.98. The S&P 500 gained 10.07 points, or 0.34%, to 2,999.76 and the Nasdaq Composite added 21.56 points, or 0.27%, to 8,145.74.

Emerging-market stocks also gained for a sixth day – their longest winning streak since early April – after US Treasury Secretary Steven Mnuchin said US and Chinese trade negotiators were nailing down a Phase 1 trade deal text for their presidents to sign next month.

The dollar index fell 0.37%, with the euro up 0.43% to $1.1118. The Japanese yen strengthened 0.20% versus the greenback at 108.58 per dollar.

Oil prices fell as industry data showed a larger-than-expected increase in US inventories, though the drop was limited by the Brexit deal.

Brent crude futures fell 25 cents to $59.17 a barrel. US West Texas Intermediate crude lost 24 cents to trade at $53.12.

US

Wall Street rose on Thursday, with the S&P 500 and Nasdaq indexes near one-month highs on upbeat earnings from Netflix and Morgan Stanley, while investors cheered Britain’s preliminary last-minute deal with the European Union.

Netflix Inc shares rose 4.4%, after the video streaming service provider added slightly more paying subscribers than Wall Street’s expectations in the third quarter.

The stock helped the communication services sector gain 0.7%.

Morgan Stanley climbed 3% after the bank beat analysts’ expectations for quarterly profit, wrapping up strong earnings from major US lenders including JPMorgan Chase & Co , Citigroup Inc and Bank of America .

The third-quarter earnings season is expected to see its first year-on-year contraction since 2016, with analysts estimating a 2.9% drop in S&P 500 earnings.

Of the 63 S&P 500 companies to have posted quarterly results so far, 82.5% have beaten estimates.

At 11:20 a.m. ET, the S&P 500 was up 10.89 points, or 0.36%, at 3,000.58 and the Nasdaq Composite was up 28.65 points, or 0.35%, at 8,152.84.

The Dow Jones Industrial Average was up 39.83 points, or 0.15%, at 27,041.81

Limiting gains on the blue-chip index was a 6% slide in shares of International Business Machines Corp after the company missed quarterly revenue estimates.

The Dow Jones Transports index, which is closely watched by investors to gauge the health of the economy, was up 0.8%.

CSX Corp shares rose 2.5% after the railroad operator beat quarterly profit expectations.

UK

Britain’s FTSE 250 slid on Thursday after Northern Ireland’s Democratic Unionist Party (DUP) cast doubts on the prospects of a Brexit deal, while shares of building materials suppliers and homebuilders tumbled after Grafton’s profit alert.

The FTSE 250, up more than 3% since last week amid a flurry of contrasting Brexit headlines, shed 0.5% as sterling slipped after the DUP said it could not back the Brexit deal as it currently stands.

The FTSE 100 snapped a three-day losing run and edged 0.2% higher by 0800 GMT, helped by a rebound in oil majors Shell and BP after days of selloff.

Unilever added 1.5% after its quarterly update and, along with fellow exporter firms, benefited from a weaker pound to further support the main index.

Mid-cap Grafton slid 12%, on track for its worst day since June 2016, after it warned on its annual profit due to weak demand in the UK and delays in new construction permits in the Netherlands.

Peers Travis Perkins, Howden Joinery and SIG gave up between 2% and 5.4%.

News-driven moves saw Moneysupermarket.com tumble 9% to a six-month low after a trading update. Liberum analysts said its insurance and money divisions underperformed.

Europe

European shares edged lower on Thursday, as strong earnings from Sweden’s Ericsson were offset by fading optimism over the Brexit deal amid investor worries about its support in the British parliament.

The pan-European STOXX 600 index closed down 0.1% after gaining as much as 0.9%, as investors initially cheered news that the European Union and Britain had clinched a deal on the terms of Britain’s exit from the bloc.

Shares in domestically focused British companies and Irish firms, which have come to be seen as a barometer on Brexit sentiment, gave up gains as the Northern Irish Democratic Unionist Party (DUP) said it would vote against the accord at an extraordinary session on Saturday.

France’s CAC 40 eased 0.4% after hitting a fresh 12-year high earlier, while Germany’s DAX closed down 0.1%, although near its strongest level in over a year. An index of eurozone stocks fell 0.2%.

Fears of a slide into recession continue to dog Europe and not all earnings were upbeat, with Swiss banking software maker Temenos tumbling more than 15%, its worst day in more than five years, after traders said third-quarter core profits missed expectations.

Swedish telecoms gear maker Ericsson was a bright spot, jumping 6% to hit a three-month high after posting quarterly core earnings that were well ahead of expectations. Shares of Finnish peer Nokia also gained 2%.

Asia

Asian shares were mixed Thursday on renewed caution over the truce in the tariff war between the US and China.

Hong Kong initially led regional gains after its chief executive, Carrie Lam, announced help Wednesday for the property sector. The semi-autonomous city’s economy has been languishing amid months of increasingly violent political protests that are in part fueled by the skyhigh cost of housing.

The Hang Seng index added 0.4% to 26,776.97 after rising more than 1% earlier in the day.

Elsewhere, sentiment was tepid. Tokyo’s Nikkei 225 index lost 0.1% to 22,451.86 while the Shanghai Composite index slipped 0.2% to 2,972.42.

Australia’s S&P ASX 200 lost 0.8% to 6,684.70 and the Kospi in Seoul gave up 0.4% to 2,074.02. India’s Sensex was flat at 38,602.70.

Shares fell in Taiwan and Singapore but inched higher in Jakarta and Bangkok.

Oil

Oil prices fell on Thursday after a larger-than-expected rise in US crude stockpiles and a series of weak economic figures, although a drop in fuel inventories helped offset the decline.

Global benchmark Brent crude lost 66 cents a barrel to trade at $58.75, a 1.1% drop, at 11:35 a.m. ET (1535 GMT). US WTI crude was down 41 cents at $52.95.

Greater-than-anticipated fall in gasoline and diesel inventories offset the rise in crude stocks. Overall imports have fallen, in part due to sanctions imposed on Chinese shipping firm COSCO that have raised the freight costs.

Adding to concerns about the global economy, and therefore energy demand, US retail sales fell for the first time in seven months, while housing starts and industrial output dropped as well. Earlier data showed a moderation in job growth and services sector activity.

Currencies

The US dollar fell against the euro on Thursday as the common currency got a lift from the European Union and Britain striking a long-awaited Brexit deal.

Britain clinched an eleventh-hour deal on its exit from the EU on Thursday, more than three years after Britons voted in a referendum to leave the bloc, but Prime Minister Boris Johnson still faces a knife-edge vote in parliament to get it approved.

While uncertainty remains on whether the pact will be ratified by British lawmakers, news of the agreement was enough to boost the euro 0.5% against the dollar and 0.66% against the British pound.

News of the deal sent sterling surging to a five-month high and within a whisker of $1.30 before retreating sharply as traders worried that British Prime Minister Boris Johnson might fail to get lawmakers to support the Brexit plan, plunging the country into another round of uncertainty. Sterling was 0.18% lower at $1.2807. The dollar has come under pressure this week, shedding about 0.6% against a basket of currencies.

The greenback, which fell on Wednesday after weak US retail sales data supported the case for further interest rate cuts by the Federal Reserve, extended its weakness on Thursday.

Data showed US homebuilding tumbled from a more than a 12-year high in September. Separately, data showed a deceleration in factory activity in the mid-Atlantic region in October.

The Norwegian crown weakened to an all-time low of 10.1800 against the euro. Some analysts blamed the crown’s recent weakness on global trade jitters, while others said the speed and magnitude of the drop were hard to explain.

The Australian dollar held near the day’s highs, up 1.04% against the dollar after jobs data showed buoyant hiring, lowering chances of monetary easing in November.