Speaker blocks 3rd vote on current Brexit deal; Sterling strengthens after no-deal Brexit rejected; UK unemployment falls below 4%.

19 March 2019

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Market news

Theresa May’s Brexit deal has been dealt a potentially fatal blow by the Speaker of the House of Commons, who yesterday scuppered the anticipated third parliamentary vote. John Bercow instructed that the unpopular deal could not be revisited in parliament without “substantial changes”. With the official Brexit deadline looming and whilst threatening a long Article 50 extension, the Prime Minister was attempting to coerce MPs into supporting the deal.

Bercow’s use of a convention dating back to 1604, with 11 days to go until the UK is due to leave the EU, has caused some ministers to express fears of a constitutional crisis. The road to Brexit is as unclear as ever; Tory Eurosceptics have welcomed the move to block another identical vote, but the government has said it will still try to get May’s deal through the Commons.

The expectation of a lengthy Brexit delay leaves Sterling near its 2019 highs, while the FTSE 100 has rallied over 3% since the beginning of last week. The pound had already strengthened 2.07% against the dollar last week after Parliament voted against a no-deal Brexit.

Global equities have enjoyed a positive week, with confidence returning after the preceding sell-off. Strong earnings and positive economic data in the US led the S&P 500 to its best week since November, rising 2.95%. The US Consumer Price Index rose for the first time in four months, registering 1.5% year-on-year. The Federal Reserve begins its meeting today.

A jump in industrial production in the eurozone, up 1.4% in January compared to December, encouraged the Stoxx 600 to rise 2.86% last week. Calm sentiment was also supported by developments between the US and China, which kept global yields steady.

Employment figures from the Office for National Statistics have brought some good news for Britain this morning. Unemployment has fallen below 4% for the first time since 1975, whereas surveys had pointed towards stagnation. Weekly earnings growth fell marginally but remains above inflation at 3.4%.

Oil prices have shot up in the past week, despite a rebound in Libyan supplies. Brent crude oil, at around $68.10 a barrel, is at its highest price since November amid continuing sanctions on Iran and Venezuela.

Economic data*

Share	Closing Values at 18/2/19	Year high	Year low
FTSE 100	7,229	7,904	6,537
Euro Stoxx 50	3,388	3,596	2,90
DAX	11,657	13,204	10,279
DJ Industrial Average	25,914	26,952	21,713
S&P 500	2,833	2,931	2,351
NASDAQ	7,714	8,133	6,190
Nikkei 225	21,585	24,448	18,949

 

FOREX versus US Dollar	Last	% Change**
British Pound	1.33	0.13
Euro	1.13	0.11

** From previous day close* Source: Thomson Reuters

 

Stock focus

Asos revealed its interim results this morning and stated that it is confident it will meet its full-year guidance. December’s profit warning saw shares plunge over 40% and the price remains well short of half the highest level reached a year ago. The fashion retailer reported an 11% rise in sales overall but a disappointing fall in the US due to the struggles of a new warehouse.

Ocado also updated shareholders this morning, reporting a rise in revenue of 11.2% in the three months to the beginning of March. A four-day fire in its Andover warehouse in February accounted for a 1.2% drag on sales, but the online grocer dismissed it as a temporary setback. It reported more orders per week, but of smaller average sizes.

Shares of Standard Life Aberdeen are higher today after it emerged it has claimed victory in a dispute with Lloyds Banking Group. Lloyds gave notice to withdraw a £100bn investment mandate from Aberdeen after it merged with Standard Life, claiming the newly formed company had become a competitor.

The potential merger between Deutsche Bank and Commerzbank has been recently talked up by both companies, but there is some fear that the prospect of heavy job losses, and union intervention, could obstruct the talks. The proposed deal has long been seen as a good idea for the banks, but has lacked political support.

JD Sports has agreed to buy its rival Footasylum in a deal worth £90m. Last year Footasylum issued two profit warnings in quick succession in the face of competition and consumers spending less freely. The offer equates to a 77% premium over the current share price, but is about half of 2017’s floatation price.

Worldpay, the leading UK payments group, is to be acquired by US rival Fidelity National Information Services (FIS) in a $43bn takeover deal. The rapid growth of online and card payments has led to consolidation within the industry and the purchase will improve FIS’s physical payment capabilities.

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