A wacky day in British politics has seen big swings in the UK’s stock market indices for larger and smaller companies as well as a surge in sterling.
Lord Chief Justice Lord Thomas of Cwmgiedd said the UK government does not have the power to trigger the country’s exit from the European Union without parliamentary approval.
A government timetable to begin the UK’s withdrawal from the EU by invoking Article 50 by the end of March now looks set to be delayed. And markets may be starting to price a slim possibility Britain will not leave at all.
Sterling gained more than a cent against the dollar on the news, from $1.235 to $1.248, while financial stocks were the main winners on the stock market.
'In the near-term, the lower risk of a hard Brexit will take some of the downward pressure of the pound,' says Kallum Pickering, senior UK economist at investment bank Berenberg.
'If sterling appreciates a little over the coming months inflation may not rise as high next-year as previously thought - a positive for real spending and near-term growth.
'In the long-term, a soft-Brexit would improve the outlook for the economy’s long-term supply potential and growth rate. The less trade, investment and migration with the EU fall after Brexit, the better it is for the UK economy in the long-run.'
FINANCIALS, PROPERTY SURGE
Stock market movements have been large as banks and property investment companies, which tumbled after the UK’s vote to leave the EU, rebounded.
Smaller companies also did better than larger businesses.
The FTSE 250 index, which includes mid cap stocks typically worth between £1bn and £3bn, gained 1.5% led by financials, retailers and industrial stocks.
Among the bigger movers, insurer Lancashire (LRE) reported better-than-expected third quarter results, though others including Clydesdale Yorkshire Bank (CYBG), up 4.1%, and London-focused property investor Capital & Counties (CAPC), up 5.2%, are gaining mainly on the back of the High Court announcement.
London housebuilder Berkeley (BKG) is up 2.8% at £24.47, roadside assistance provider AA (AA.) is up 5.2% at 265p and WH Smith (SMWH) gains 3.4% to £15.36.
FTSE 100: Movers By Sector (Index: -0.33%)
Source: Thomson Reuters
MEGA CAP STOCKS FALL
FTSE 100 stocks, companies with a market value above £3bn which earn most of their money abroad, are down 0.5% because gains in sterling reduce the value of their profits and dividends to UK investors.
Miners Rio Tinto (RIO), Anglo American (AAL) and Glencore (GLEN) are the among the bigger drags on the FTSE 100, down between 1% and 4%.
International consumer staples businesses are also holding back the large cap index: beverages giant Diageo (DGE) is down 2.5% at £20.79, Unilever (ULVR) trades 1.5% lower at £33.63 and Reckitt Benckiser (RB.) loses 1.2% at £71.28.
Moving the other way among large cap stocks are Lloyds Banking Group (LBG), Barclays (BARC) and Prudential (PRU) as fears of a hard Brexit impacting the financial sector ease.
Disclosure: The author owns shares in Lloyds Banking Group
