HONG KONG (AFP) – The pound clawed back earlier losses yesterday in Asia after Boris Johnson’s failure to push through his Brexit deal fuelled fresh uncertainty, while regional equities ticked lower as investors took a step back after recent gains.
With everything quiet on the China-United States (US) trade talks, attention was on Westminster where Britain’s Prime Minister finally got MPs to agree to his European Union (EU) divorce pact, but minutes later lost a vote on a truncated debate that would have passed it in just three days.
The news means Johnson is unlikely to fulfil his pledge of leaving the EU by the October 31 deadline, and raises the possibility of his calling a general election before the end of the year.
EU chiefs are now expected to recommend another extension to the withdrawal date, which analysts said the Prime Minister would blame on opposition lawmakers in the event of a national poll. The prospect of another delay hit sterling, which briefly fell as low as USD1.2841 yesterday before bouncing back as European business started.
The unit had earlier this week broken USD1.30 for the first time in five months on hopes of averting a painful no-deal divorce. It was also lower against the euro.
London’s FTSE index edged up 0.1 per cent in mid-morning trade.
“Getting a revised withdrawal agreement to this point and winning with a convincing margin… is an extraordinary achievement,” said Senior Market Analyst at AxiTrader Stephen Innes.
“But with Parliament rejecting Johnson’s truncated timetable in favour of more time to debate the bill, it now means members will give the statute the fine-tooth comb treatment, opening it to more criticism suggesting it could be knocked down later.”
However, one observer pointed out that remarks from Johnson that he would drag Britain out of the EU with the deal come what may could be significant.
“This could be an important, indeed key, shift in the government’s position as it may indicate a willingness to extend and then seek to get the bill through Parliament,” said Neil Wilson at Markets.com.
“My initial thoughts are that the government will let the EU offer the extension to get the bill through, and (Johnson) can square the circle later with amendments etcetera.”
But he added that “the permutations remain nearly endless… Uncertainty prevails, but Parliament has backed a deal and that feels like a key moment”.
The news weighed on US markets, with all three main indexes ending down, and the losses seeped through to Asia.
Shanghai slipped 0.4 per cent and Hong Kong was down 0.8 per cent, with traders keeping tabs on reactions to a Financial Times report saying China was drawing up a plan to remove the city’s beleaguered chief executive after nearly five months of pro-democracy unrest. Singapore fell 0.6 per cent and Seoul was off 0.4 per cent, while Taipei and Manila and Jakarta were also in the red.
Wellington tumbled more than two per cent, with energy firms battered by worries about electricity prices after Rio Tinto said it was considering closing a power-guzzling aluminium smelter, potentially leaving the country awash with excess capacity.
Also, major construction firm Fletcher Building fell as a massive fire hit a USD450 million convention centre it is building in the middle of Auckland.
But Tokyo edged up 0.3 per cent, while Mumbai and Jakarta also rose while Sydney was flat. Frankfurt shed 0.4 per cent and Paris dropped 0.6 per cent.
Oil prices dipped after data indicated US stockpiles increased again last week, reinforcing worries about demand as the world economy slows.