SEE-SAWING WE GO

If the European leaders decide that they need more time... the pound will travel south

Konstantinos Anthis, Analyst at ADSS

The behaviour of the Treasury market is forcing equities to think that it has gotten ahead of itself

Patrick O’Hare, Chief market analyst at Briefing.com

london — Markets were volatile and the pound fell further ahead of a key Brexit summit in Brussels on Thursday, while equities investors tried to come to grips with an unexpectedly dovish message from the US Federal Reserve.

Sterling, seen as a barometer for Britain’s long-running Brexit saga, remained on the backfoot over fears that the country could crash out of the EU without a deal continued to fester.

British Prime Minister Theresa May was back in Brussels on a last-gasp mission to beg EU leaders for more time to deliver a Brexit deal that was twice rejected by her own parliament. May has declared that she is “determined” to deliver Brexit, after formally requesting a three-month delay on Wednesday. However, investor fears persist that the 27 other EU leaders could refuse the request, potentially sending Britain crashing out of the bloc in just eight days’ time. The pound fell as low as $1.3106 in midday trading.

“If the European leaders decide that they need more time — possibly a week — to respond to May’s request then the pound will travel south towards the $1.30 support as uncertainty will again soar,” warned analyst Konstantinos Anthis at trading firm ADSS.

14.5% Drop in Guess shares after disappointing Q4 forecast

The Bank of England, as expected, held its main interest rate steady at 0.75 per cent.

In afternoon trade, London’s FTSE 100 was up 0.3 per cent at 7,312.20, Frankfurt’s DAX 30 was down 0.9 per cent at 11,502.11 and Paris’ CAC 40 fell 0.4 per cent at 5,361.40. The Euro Stoxx 50 slid 0.5 per cent at 3,356.76.

US stocks moved broadly higher in early trading on Wall Street on Thursday as technology stocks offset declines in the banking sector.

Investors were also absorbing the latest Brexit developments.

The Fed’s Wednesday announcements — which included details on how it planned to end the runoff of its current balance sheet of assets acquired following the financial crisis a decade ago — have helped push down yields on Treasury bonds, flattening the so-called yield curve, a closely watched recession indicator.

“If nothing else, the behaviour of the Treasury market is forcing the stock market to think that it has gotten ahead of itself, which is creating some selling interest in the immediate wake of a Fed decision that was surprising and not surprising at the same time,” analyst Patrick O’Hare wrote at Briefing.com.

Apple rose 2.8 per cent as it continues to announce new products. Olive Garden owner Darden Restaurants soared 6.4 per cent after reporting earnings that were far better than analysts were expecting.

Biogen, a major biotechnology company, took a 29 per cent nosedive after stopping a trial for an Alzheimer’s drug. Other health care stocks also fell. JPMorgan led a decline in banks with a loss of 1.8 per cent.

The biotechnology giant plunged after the company halted development of a highly anticipated Alzheimer’s drug. The company and its partner determined that the drug would likely be ineffective. Like its peers, the drugmaker spends heavily on research and development in the hopes that revenue from a successful drug will make up for the costs.

Bond prices continued to rise, sending yields lower, a day after the Federal Reserve said it expected the economy to slow down and that it no longer expected to raise interest rates this year.

The Dow Jones Industrial Average rose 62 points, or 0.2 per cent, to 25,806 as at 10:20am. The S&P 500 index rose 0.3 per cent and the Nasdaq rose 0.4 per cent.

Clothing retailer Guess gave investors a disappointing fourthquarter report and forecast, sending shares 14.5 per cent lower.

The company’s fourth-quarter profit and revenue both came up short of forecasts. Its profit forecast for the year also fell far shy of Wall Street’s expectations.

In Asia, Hong Kong’s Hang Seng dropped 0.9 per cent at 29,071.56, while the Shanghai Composite rose 0.4 per cent at 3,101.46. Markets in India and Japan were closed for holidays. —