Markets tread lower before key Brexit speech
Europe’s main stock markets slid yesterday but the pound rebounded somewhat, as British Prime Minister Theresa May was set to make a hotly-anticipated speech on Brexit strategy. London stocks declined as investors reacted also to news that annual inflation jumped to a two-and-a-half year peak at 1.6 percent in December.
Britain’s premier is expected to say she favors a clean break from the European Union, dismissing a “half-in, half-out” Brexit deal with Brussels. May, speaking at around 1145 GMT, is likely to give further signals that Britain is heading to what analysts call a “hard Brexit”. “Not partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out,” the prime minister will say, according to an extract of her speech circulated in advance to the media by Downing Street.
“We do not seek to adopt a model already enjoyed by other countries. We do not seek to hold on to bits of membership as we leave,” she will add in a speech due in central London. A hard Brexit would see Britain’s departure from the single market or tariff-free zone, while also ending the free movement of people. “European shares are trading moderately lower... ahead of May’s speech where she is expected to announce her Brexit strategy,” said Markus Huber at trading firm City of London Markets.
“Whilst traders are eagerly awaiting her speech due to multiple leaks over the past few days, it might very well be that most of what the speech will contain is already well known in advance and therefore its impact on stocks and the pound should limited.” Sterling had slumped Monday on reports that May was ready to take the country out of the European Union in a hard Brexit.
The pound had collapsed to $1.1986, its lowest level since October’s “flash crash” that had sent it to a 31-year low of $1.1841. However, the British currency rebounded slightly yesterday to hold above $1.21. “After such a sharp fall yesterday it seems to be in rebound mode at the moment,” noted Spreadex analyst Connor Campbell. “The fact that the currency knows much of what May is going to say likely helps, as does the increase in clarity this speech will hopefully bring about.”
Asian investors meanwhile moved warily yesterday before May’s speech on and ahead of Donald Trump’s inauguration on Friday. While world markets soared in the months after Trump’s November election win, he has yet to flesh out precise details of his spending and tax plans for the world’s number one economy. There is also unease about his campaign rhetoric in which he promised to tear up trade deals and slap tariffs on China, which has already hit back at his comments, fuelling worries of a possible trade war. — AFP