Markets soar on fresh hopes of a Brexit deal

Sterling jumps 4 per cent in just two days

INVESTORS piled into British assets yesterday amid signs Boris Johnson is closing in on a Brexit deal with the European Union.

On a dramatic day on the financial markets, sterling jumped another 2.1pc against the dollar to a high above $1.27, taking gains over the last two days to more than 4pc.

That was the biggest two-day rise since the financial crisis.

The pound has also risen 3.5pc against the euro since Johnson and his Irish counterpart Leo Varadkar indicated on Thursday afternoon that they could ‘see a pathway to a possible deal’.

Further talks in Brussels yesterday between Brexit Secretary Stephen Barclay and the EU’s chief negotiator were described as ‘constructive’.

The European Commission said the two sides had now ‘agreed to intensify discussions over the coming days’ – raising hopes that a deal will be struck.

Shares in British companies soared with banks, builders and High Street retailers among the biggest risers. Some 25 stocks in the FTSE350 made double-digit percentage gains with the FTSE250 clocking up its biggest points rise of all time.

In a bullish note to clients, JPMorgan economist Malcolm Barr said: ‘This changes everything. We now expect a deal. For the first time, a UK exit from the EU on the basis of a withdrawal agreement within a matter of weeks now looks the single most likely path ahead.’

Harry Adams, co-chief executive at currency firm Argentex, said further positive rhetoric around a deal could trigger ‘a very aggressive rally’ in sterling past $1.33 – and then to around $1.40 if an agreement is passed by Parliament. However, analysts warned that the market rally could be reversed if hopes of a deal are dashed.

‘Sterling is only ever as good as the latest headline,’ said Ranko Berich, head of market analysis at Monex Europe.

A host of British stocks also soared higher. The FTSE100 index rose 0.8pc, or 60.72 points, to 7247.08, but the FTSE250 – which is dominated by British companies – leapt 4.2pc, or 805.99 points, to 20,041.71. It was the biggest points rise of all time and the largest percentage gain since February 2016.

Banks, housebuilders and retailers – whose fortunes are closely aligned with those of the economy – were among the biggest risers. Lloyds Bank gained 12.3pc and RBS was up 11.5pc. CYBG, which owns Clydesdale Bank, Yorkshire Bank and Virgin Money, jumped 14pc while One Savings Bank was 13.2pc higher.

Among the blue-chip builders, Barratt Developments was up 11.5pc, Persimmon 10.9pc, Taylor Wimpey 10.8pc and Berkeley Group 8.5pc. And on the High Street, B&Q owner Kingfisher gained 9pc and Next rose 8.5pc.

Fiona Cincotta, senior market analyst at City Index, said the stocks on the FTSE250 took a big hit following the referendum.

‘A No Deal Brexit could have inflicted significant further damage on these stocks. The prospect of a No Deal Brexit being avoided is like Christmas has come early,’ she said.

City commentator David Buik, of trading firm Core Spreads, added a note of a caution.

‘If there is No Deal, these shares will go all the way back from whence they came,’ he said.