Stock markets and pound get ‘deal’ booster
SAVERS with money tied up in the stock market enjoyed a recordbreaking day amid hopes that Boris Johnson is closing in on a Brexit deal with the EU.
In a boost to the pensions and investments of millions of families, one of the major benchmarks on the London Stock Exchange jumped 4.2 per cent.
The FTSE 250 index, which is more closely linked to the UK economy than the FTSE100, climbed 805.99 points higher to 20,041.71. It was the biggest points rise of all time and the largest percentage gain since February 2016.
The previous record points gain was a rise of 645 in September 2008.
Gains on the more internationally focused FTSE100 were more modest, at 0.8 per cent, while the pound clocked up its biggest two-day rise since the financial crisis in 2009.
Stocks with close links to the British economy, including banks, housebuilders and retailers, were among the biggest risers. It is hoped that a Brexit deal will provide a much-needed boost to the economy by lifting the fog of uncertainty that has hung over Britain since the EU referendum in 2016.
Mike Cherry, national chairman of the Federation of Small Businesses, said: ‘After months lost in the Brexit uncertainty that has hit many of our small businesses, there finally appears to be a glimmer of hope at the end of the tunnel.’
Sterling also rose, adding to gains made on Thursday after Mr Johnson and his Irish counterpart Leo Varadkar indicated they could ‘see a pathway to a possible deal’.
The pound jumped another 2.1 per cent against the dollar to a high above $1.27, taking gains over the past two days to more than 4 per cent. Against the euro, sterling has risen 3.5 per cent in two days to close to €1.15.
Russ Mould, investment director at savings and investment firm AJ Bell, said: ‘The huge rally in the share prices of those firms that rely on the British economy for their bread and butter – banks,
‘Start to plan for the future’
house builders, retailers – shows how much damage the uncertainty over Brexit has done to large parts of the stock market. If a deal can be struck with Brussels – and then approved by Parliament – the stock market could rally further, with domestic-facing names leading the way.
‘More fundamentally, it will allow businesses to start to plan for the future in terms of jobs and investment, because they will know what they are dealing with, from the point of view of trade and the economy.’
But CMC Markets analyst Michael Hewson warned that optimism ‘needs to be tempered’ and said the upbeat sentiment could be short-lived. ‘This pathway to a deal could well be a road to nowhere,’ he added.
Fiona Cincotta, an analyst at City Index, said City traders were ‘growing in confidence that a No Deal Brexit will be avoided in three weeks’ time’.
A note from analysts at JP Morgan, America’s biggest bank, was even more upbeat, declaring Mr Johnson’s talks with the Irish premier had changed ‘everything’.
‘The key question is whether there are substantive proposals behind it which could move the dial toward a deal,’ they told clients. ‘At this stage details are scant... But if our understanding of the situation is correct, a solution to the Irish border problem which could ultimately be acceptable to all parties has been identified.’
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