Stock markets and pound get ‘deal’ booster
SAVERS with money tied up in the stock market yesterday 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 FTSE 100, 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 FTSE 100 were more modest, at 0.8 per cent, while the pound clocked up its biggest twoday rise since the financial crisis.
Stocks with close links to the British economy, including banks, housebuilders and retailers, were among the biggest risers. It is hoped a Brexit deal will provide a muchneeded boost by lifting the uncertainty that has hung over businesses since the referendum, finally allowing them to plan for the future.
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 the Prime Minister 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 firms that rely on the British economy – banks, housebuilders, retailers – shows how much damage the uncertainty over Brexit has done to the stock market. If a deal can be struck with
‘Start to plan for the future’
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 Michael Hewson, an analyst at broker CMC Markets, warned that optimism ‘needs to be tempered’ and said the upbeat sentiment could be shortlived. ‘This pathway to a deal could well be a road to nowhere,’ he added.
The hope for a Brexit deal is also bad news for speculators who have been betting that the pound would fall – a trade known as ‘shorting’.
Mr Johnson was previously accused by his sister, Rachel, of being influenced by ‘people who have invested billions in shorting the pound and shorting the country in the expectation of a No Deal Brexit’. But yesterday, currency traders were backing off.
Trevor Greetham of Royal London Asset Management told the Financial Times: ‘We didn’t have enormous short sterling positions but we have certainly been unwinding them. The market is moving from concern about No Deal to belief there will be some kind of deal.’
And Deutsche Bank told clients that Brexit talks had reached ‘a potentially pivotal moment’, cancelling its previous recommendation to short the pound.