Pound stands firm after May loss, London stocks edge up

HONG KONG (AFP) – The pound held its ground yesterday and London’s FTSE opened higher after the record defeat of British Prime Minister Theresa May’s Brexit plan, as investors consider the next developments in the long-running saga.

Sterling tanked to a near two-year low soon after the government’s proposal on leaving the European Union (EU) was soundly beaten last Tuesday evening, but it soon bounced back as traders bet there would not be a “no-deal” exit.

And while it was slightly lower in Asia, the pound managed to avoid the sort of pummelling many had predicted, and analysts say the positive news is that the options for the future are narrowing.

With May expected to win a vote of no confidence called by the opposition Labour Party yesterday, talk will move to what happens next.

Analysts say May could ask to delay Britain’s March 29 exit from the bloc as she looks for a more palatable agreement from her EU peers, while there is growing speculation of a general election and even another referendum.

A woman walks past an electronic board showing the Hong Kong share index outside a local bank in Hong Kong. – AP

“Momentum is shifting away from the harder Brexit route and towards a number of options ranging from postponement and second referendum. That is pound supportive,” said Gavin Friend at National Australia Bank.

But he added, “I don’t see the pound rallying much until markets are sure the (ruling) Conservatives have seen off the confidence motion.”

Meanwhile, some warned London may still leave the bloc without a backup.

“We cannot ignore the fact that it takes very little effort for no-deal, whilst it takes a vast amount of effort to avoid it,” warned chief market analyst at Markets.com Neil Wilson.

In Brussels EU chief negotiator Michel Barnier warned “the risk of a no deal has never seemed so high”.

Asian equity markets mostly rose after last Tuesday’s rally that was fuelled by Chinese plans to cut taxes in a bid to support the stuttering economy.

However, traders are growing increasingly worried about the lack of movement in the United States (US) over the government shutdown, which is now in its fourth week, with both sides digging their heels in.

Tokyo ended off 0.6 per cent, but Hong Kong rose 0.3 per cent to build on last Tuesday’s two per cent rally while Shanghai was flat.

Sydney and Seoul each rose 0.4 per cent, while Singapore added 0.3 per cent and Wellington put on 0.7 per cent with Mumbai 0.2 per cent higher.

London’s FTSE index started 0.2 per cent higher, while Paris and Frankfurt also rose.

Investors are now gearing up for the start of the corporate earnings season and some are concerned that the effects of recent soft economic data globally – as well as the China-US trade war – will begin to show up in accounts.