European markets move higher on Brexit trigger day
Shrugging off the worries about the outcome of the Brexit talks which can now get underway, most European markets managed end the day positively. Germany’s Dax hit a new two year high and came within 200 points of its all time high of 12,392 reached in April 2015. The FTSE 100 was helped by the weakness in the pound following the triggering of Article 50, and even an early fall on Wall Street failed to pull European shares lower. The final scores showed:
- The FTSE 100 finished up 0.41% or 30.30 points at 7373.72
- Germany’s Dax rose 0.44% to 12,203.00
- France’s Cac climbed 0.45% to 5069.04
- But Italy’s FTSE MIB fell 0.26% to 20,276.8
- Spain’s Ibex ended 0.21% lower at 10,367.6
- In Greece, the Athens market added 0.61% to 668.55
On Wall Street, the Dow Jones Industrial Average is currently down 58 points or 0.28%.
On that note, it’s time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.
The pound continues to hover above the $1.24 mark, down around 0.3% on the day when the Brexit process finally got underway.
But it is not just Brexit of course which is responsible for the dip. The weakness of the pound against the dollar also has to do with the prospect of further US interest rate rises. Michael Hewson at CMC Markets points out:
The US dollar has continued to rise after comments from Charles Evans of the Chicago Fed that he favoured one to two rates rises this year, with the euro in particular coming under pressure.
Meanwhile, against the euro sterling has edged up 0.2% to €1.1535, with the single currency weakened by reports that the European Central Bank is in no rush to start winding down its low interest rate and bond buying programmes.
The slip in the pound compared to the dollar has of course boosted the FTSE 100, which is packed full of overseas earners which benefit from weaker sterling,. Joshua Mahony, market analyst at IG, pointed out that the triggering of Article 50 did lead to a topsy turvy day on the markets:
A historic day for the UK and Europe as a whole has been matched by a suitably volatile day for the FTSE, with initial gains fading to red, only to rebound into the close. Perhaps today’s FTSE trade was a precursor of the times we have ahead both economically and emotionally, as this painful divorce progresses from stage to stage. First came disbelief, then came denial (calls for a second referendum), and today we moved into the reality phase, as the UK and EU alike realised that there is no going back. The forthcoming years will no doubt prove volatile and unpredictable, yet ultimately the end result is what matters most. For these negotiations will play a huge role in dictating the future prosperity and unity of the UK.
Despite a degree of hostility in recent months, today was surprisingly cordial, with the conciliatory tone struck in Theresa May’s letter being matched by Tusk’s decision to proclaim ‘we already miss you’. The lack of any real fire and divisiveness on either side will have no doubt been responsible for what was a fairly orderly day for the pound, all things considered.
Oil prices are on the rise as the US reported that crude stocks rose by less than expected last week.
US oil inventories climbed by 0.9m barrels to 534m barrels according to the Energy Information Administration. This compares to the 5m gain recorded in the previous week, and the 2m forecast by analysts.
The news of stronger than expected demand has helped push Brent crude up 1.6% to $52.17 a barrel and West Texas Intermediate a similar amount to $49.18.
US house sales rebound in February
Signs of recovery in the US housing market.
After falling 2.8% in January, pending home sales jumped by a higher than expected 5.5% last month, a ten month high and the second best reading since May 2006, according to the National Association of Realtors. Analysts had forecast a rise of 2.4% month on month, and the better than expected figure was partly due to unseasonably warm weather. Lawrence Yun, the association’s chief economist, said:
Buyers came back in force last month as a modest, seasonal uptick in listings were enough to fuel an increase in contract signings throughout the country,. The stock market’s continued rise and steady hiring in most markets is spurring significant interest in buying, as well as the expectation from some households that delaying their home search may mean paying higher interest rates later this year.
Last month being the warmest February in decades also played a role in kick-starting prospective buyers’ house hunt.
Feb pending existing home sales surge 5.5% but are still up only 2.6% over the past 12 months
— Joseph A. LaVorgna (@Lavorgnanomics) March 29, 2017
Updated
Back with the pound, which is currently down 0.17% at $1.2427 against the dollar.
It is off its worst levels but also off its high of $1.2478 which came as Theresa May unveiled the government’s Brexit plans. Kathleen Brooks at City Index said:
Article 50 happened with more of a whimper than a bang. Although the pound initially rallied it has since backed off its highs as the market gets to grip with Theresa May’s letter to Donald Tusk and the EU’s response. Essentially both sides were polite to each other, which helped to keep volatility supressed and price action fairly muted. Hence the range in GBP/USD was only 100 pips for this historic event.
Updated
Wall Street opens lower
Away from Brexit and the UK, and the Dow Jones Industrial Average is on the slide in early trading.
On Tuesday, the Dow avoided closing lower for the ninth day in a row, which would have been its worst performance for almost 40 years. But the respite has been brief, and it is now down 53 points or 0.26%. The S&P 500 and Nasdaq Composite both edged lower at the open.
The triggering of Article 50 “sets the stage for a challenging negotiation process with a wide range of possible outcomes regarding trade and institutional arrangements”, according to ratings agency Fitch. It said:
The uncertainty created by the EU referendum is a sovereign rating weakness for the UK (AA/Negative). But the wide spectrum of possible outcomes from negotiations means the rating is not predicated on any particular base case...
The number and complexity of issues to resolve, and the multiple national interests involved will make the negotiations difficult. There is no precedent for leaving the EU, and the UK will not be in control of the negotiating agenda. Two years is a short time to reach a free trade agreement (one of the Brexit aims set out in Prime Minister Theresa May’s 17 January speech), and the time available may be less if the terms of the UK’s withdrawal, including any “exit bill” relating to items such as budget commitments and staff pensions, have to be agreed first.
Domestic political challenges include the lack of a unified national position on Brexit, potential shifts in public opinion, and the Scottish government’s current intention, backed by a vote by the Holyrood parliament, to hold a second independence referendum...
[It] is possible that the UK fails to secure a future trade relationship with the EU or agreement for an implementation phase in the two years of negotiations, and reverts to WTO terms. The “cliff effect” and likely shock to the UK economy made a WTO scenario the most negative of the three hypothetical Brexit trade scenarios we examined in December last year.
The UK has not experienced an abrupt economic slowdown since the EU referendum, but our GDP forecasts reflect a weaker investment outlook due to uncertainty during the negotiation period. They also incorporate slower consumer spending growth due to higher inflation following the depreciation of sterling that occurred after the referendum. These effects are partially offset by better prospects for net trade given the weaker pound. We forecast UK GDP growth to slow to 1.5% in 2017 and 1.3% in 2018, and consumer price inflation to rise to 2.8% by end-2017 before falling back slightly to 2.6% by end-2018.
And here’s the British Chambers of Commerce, which wants a “grown up dialogue” and early news on trade deals. BCC director general Adam Marshall said:
Now that Brexit negotiations are set to begin, businesses across the UK and their trading partners in Europe want answers to practical questions, not political posturing. A pragmatic and grown-up dialogue on the real-world issues, rather than verbal volleys between London and Brussels, would give firms greater confidence over the next two years.
In the early weeks of the negotiation process, businesses would like to see an effort to secure simultaneous exit and trade talks. Concluding exit and trade negotiations at the same time would moderate adjustment costs for UK businesses, and enable trade between UK and EU firms to continue with less disruption.
He added that the government should not focus on Brexit to the exclusion of everything else:
It is crucial for the Prime Minister and her government to remember Brexit is not the only thing on the minds of UK businesses. Issues here at home, from the training system to sky-high business rates and up-front costs, still need to be addressed.
Businesses would not look kindly on a government that treats Brexit as its only job. Getting the fundamentals right here in the UK is as important, if not more important, than any eventual Brexit deal.
The UK bioscience industry has reacted to the triggering of Article 50 by saying the sector is used to “working with uncertainty and risk.” Steve Bates, chief executive of the Bioindustry association, said:
We welcome the Prime Minister’s commitment to make the UK one of the best places for science and innovation....It was also encouraging to see the Prime Minister’s letter mention the importance of prioritising ‘how we manage the evolution of our regulatory frameworks to maintain a fair and open trading environment’...
Early agreement on key issues like the regulation of medicines, the regime to enable non-UK nationals to work and contribute to the UK life science ecosystem, trade, finance support, market and intellectual property rules, would be the best way to ensure speedy and continuing global inward investment into the UK and EU. It would also be in the best interest of patients who require access to innovative healthcare.
During the negotiation, the BIA will continue to provide dispassionate insight and commentary on the Brexit process. We will continue to make our members’ expertise available to the government and its key agencies in the coming weeks and months as we work through highly complex and technical issues. The BIA remains committed to making the UK the third global cluster for life sciences and we will work closely with government and relevant agencies to deliver this ambition.
Moody’s has also produced this graphic showing the various ways in which Brexit could disrupt the UK economy, and which sectors are most vulnerable.
Brexit begins: What the experts say
There’s lots of City reaction to the triggering of Article 50.
Business chiefs are urging the prime minister to avoid the dreaded cliffedge, in which Britain leaves the EU in 2019 without a deal. Traders are anticipating much volatility as the talks begin.
Here’s a selection:
Paul Drechsler, CBI President, said:
The first six months are crucial as the UK heads into these challenging and unprecedented negotiations. Securing some early wins is therefore vital to set us on the right path.
“Most welcome of all would be the immediate guarantee of the right to remain for EU citizens here and UK nationals in Europe, which all governments agree is desirable.
“Businesses will welcome the upfront commitment to an implementation period to rule out cliff-edges for firms on both sides of the Channel – though more detail will be needed. Meanwhile, we must work constructively to design a means to maintain some influence over regulations affecting UK businesses in our biggest market.
“And discussing new trading arrangements should go hand-in-hand with negotiating the UK’s exit from the EU.
“It will be important to deliver on the commitment to include the devolved nations and all regions of the UK in the discussions.”
Colin Ellis, Moodys chief credit officer for Europe
Although the UK government’s decision to invoke Article 50 of the Lisbon Treaty represents an important milestone in the Brexit process, it is in line with the UK’s previously stated timetable and in itself doesn’t materially alter our credit analysis.
“As negotiations between the two sides move a step closer, a key part of our assessment of the impact of Brexit will be the extent to which the UK and the EU are able to come to an agreement on their future relationship, as well as the speed with which this is achieved.
“Our base case is that the UK and the EU will eventually come to an agreement to preserve most – but probably not all – of the current trading relationships. However, such an agreement would likely take years of negotiation, and there are clear downside risks. Substantial new tariff or non-tariff barriers, in particular, would have an adverse impact on UK sectors that trade extensively with the EU market.”
Jim Leaviss, Head of Retail Fixed Interest at M&G Investments
Clearly the best scenario would be a civilised divorce, where negotiations are constructive and low-key, thereby minimising any potential impact on demand. Any signs of an acrimonious divorce, with a hardening in rhetoric on both sides, would likely result in a deeper impact on demand and possibly a recession. In this scenario, monetary policy will likely remain highly stimulatory with the possibility of another round of quantitative easing, while the UK Government may also seek to stimulate the economy through loosening the fiscal reins.
“Unwinding EU membership is unprecedented and the economic implications are highly uncertain. Given this uncertainty, consumers and businesses are likely to be cautious about the future economic outlook as well. However, given the UK has access to the Single Market until 2019, businesses will likely react by stockpiling inventories in anticipation of the UK possibly having to trade under WTO rules after being removed from the European Union. Additionally, consumers may bring forward consumption before tariffs are potentially placed on imports coming into the UK. Consequently, short-term economic growth may be boosted over the course of the next 12-18 months, provided real incomes aren’t squeezed too much by rising inflation and stagnant wage growth.
Ed Anderson, Head of Research at FxPro:
Since it is in neither the UK nor EU’s interests to make all our lives difficult, further weakness for the pound could be contained. However, as we’ve seen with the Eurozone crisis things are left until the very last minute and so it’d be wise to prepare for a bumpy road ahead.
Alexandra Russell-Oliver, currency markets analyst at Caxton FX
Ultimately, markets will be looking ahead to the next steps in the process. The tone of negotiations going forward will be key, particularly whether the UK and the EU maintain their cooperative approach. Negotiations pose a threat to the pound’s strength until we get greater clarity. Further volatility is likely.”
Our Politics Live blog has comprehensive coverage of events in Westminster, and in Brussels, where European Council president Donald Tusk has said “We already miss you”....
Updated
Not only was the pound’s Brexit rally pretty small, it didn’t last long either!
Sterling is now back in the red, down 0.2% at $1.242.
The pound falls back to where it was when Theresa May stood up in Parliament https://t.co/Z4nqYYwoPl pic.twitter.com/1ehXMRBg3d
— Bloomberg Brexit (@Brexit) March 29, 2017
Pound creeps up as Article 50 triggered
Back in the City, sterling has hit its highest level of the day as Britain formally triggers the two-year process of exiting the European Union.
It’s a small move, though - the pound gained 0.2 of a cent, or 0.25%, to $1.247. That’s still lower than 24 hours ago.
Many of the big companies on the London stock market are sensitive to the pound’s value, as it affects the value of their overseas earnings.
So the FTSE 100 has now fallen into the red, down 25 points or 0.35% at 7317.
Our Politics Live blog has all the details as Theresa May outlines the next steps:
The EC’s decision may also mean that the LSE no longer has to sell its French clearing business, LCH Clearnet, to rival exchange Euronext.
That sale was part of the LSE’s (failed) attempt to persuade Brussels to wave the merger with Deutsche Börse through. Now, though, it could choose to trigger an exit clause in the deal and keep Clearnet.
Euronext CEO Stephane Boujnah, though, sounds keen to press on with the sale, saying:
“Euronext remains a willing buyer of Clearnet SA in the terms agreed on January 3rd but in the absence of obtaining an agreement, Euronext is fully committed to securing the best long-term solution for its post-trade activities, in the interests of clients and shareholders.”
That position makes a lot of sense - buying Clearnet allows Euronext to diversify beyond its traditional cash equity business (share trading).
Analysts at UBS said yesterday that:
{Acquiring Clearnet] would diversity Euronext’s revenue base. On a pro forma basis, post-trade revenues would account for 32% of Euronext’s total revenues (up from 14% on a standalone basis). Such a deal would also reduce Euronext’s reliance on cash equity trading commissions from 36% of the standalone revenue base to 28% on a pro forma basis.
LSE "vulnerable to another takeover bid"
What now for Xavier Rolet, the boss of the LSE?
Rolet had planned to step aside once the merger with Deutsche Börse was compete. He hinted earlier this month that he’d stay on if the deal failed, but there must be some uncertainty over his long-term future.
Especially as the LSE could find itself on the end of another takeover bid in future, potentially from the US.
John Colley, Professor of Practice at Warwick Business, says that a new CEO might be needed to deliver a new strategy.
“Whilst the business is performing well at the moment there is very likely to be some fallout from Brexit. A weakened LSE may need to look west for a future partner and strategy.
“There is likely to be plenty of interest from that quarter where Chicago’s Intercontinental Exchange (ICE) has grown rapidly in recent years through acquisition. Dollar strength against Stirling and low costs of borrowing suggest that ICE will come calling very quickly. The LSE is now vulnerable to a bid following the failed merger and an ambivalent CEO.”
The LSE-Deutsche Borse merger has a troubled time, even before the EC pulled the plug today.
First there was the EU referendum, held four months after the tie-up was announced. Both sides pressed on despite the Brexit vote, with German politicians arguing that it would make sense to move LSE operations in, say, euro clearing, out of London to Frankfurt.
But the two sides also reportedly clashed over where to site the headquarters of the joint business (surprise surprise, each wanted it in their own patch).
And there was drama in February, when German authorities started probing Deutsche Börse‘s chief executive over his purchase of shares in the exchange just weeks before negotiations with the LSE began. Deutsche insisted Carsten Kengeter hadn’t done anything wrong, but it added another layer of uncertainty to the deal.
Shares in the London Stock Exchange have jumped by 2.7% since the decision was announced, making it the top riser on the FTSE 100.
The collapse of the tie-up between the London Stock Exchange and Deutsche Borse deal isn’t a great surprise.
Last month, the LSE warned that the creation of a £22bn trading giant was at risk, after the EC insisted it sold its MTS division, a demand the UK firm felt was disproportionate.
Updated
Why EC blocked the deal
Europe’s main objection to the LSE-Deutsche Borse merger is that it would have hurt competition, pushing up the cost of trading, and ultimately making it more expensive to move money around the syste,
As commissioner Vestager put it:
“The European economy depends on well-functioning financial markets.
“That is not just important for banks and other financial institutions. The whole economy benefits when businesses can raise money on competitive financial markets.”
Q: Will Brexit prevent the Commission from influencing or blocking potential deals involving the London Stock Exchange?
Vestager reminds the press pack that she cleared a merger between two US companies, Dow and DuPont, on Monday. The EC had raised concerns, the firms addressed those concerns, and the deal got the green light.
Vestager adds:
We deal with any company who has a footprint in the European market, because we want competition in the European market, no matter your flag and no matter your ownership.
That goes for everyone.
Updated
EC denies Brexit influenced LSE-Deutsche Börse deal
Vestager denies that her decision was influenced by the fact the London Stock Exchange will be outside the European Union in two years.
She says:
The UK is part of the EU until it is not any more, which means it is part and parcel of the legislation and the merger review.
Triggering negotiations today isn’t the end of the procedure, it’s the beginning of the procedure.
The European Commission is blaming the London Stock Exchange for forcing it to block the merger with Deutsche Börse today.
Commissioner Margrethe Vestager says the LSE declined to sell its Italian bond trading division, called MTS.
That refusal meant that the merged company would have too dominant a position in the financial markets, Vestager tells reporters in Brussels.
She says:
The Commission cannot allow the creation of monopolies, and this is what would have happened in this case.
And this is why we have prohibited this merger, for the benefits of competition in Europe in financial markets, to the benefit of European business and therefore also European citizens.
Updated
EC blocks London Stock Exchange merger with Deutsche Börse
Newsflash: European regulators have red-carded the proposed merger between the London Stock Exchange and Germany’s Deutsche Börse.
The European Commission has just announced that it is blocking the takeover, which was announced over a year ago.
The deal would have created a European trading powerhouse, with a powerful position in stocks, bonds [fixed-income trading] and complex financial instruments.
The EC says that the two exchanges failed to address its concerns that the offer would have hurt competition, and create “a de facto monopoly in the crucial area of fixed income instruments”.
Commissioner Margrethe Vestager is announcing the decision now; it’s being streamed live here.
Good Brexit day to bury bad news - EU blocks LSE-Deutsche Börse merger - AFP
— Danny Kemp (@dannyctkemp) March 29, 2017
Updated
After a weak start, the pound is suddenly rousing itself!
Sterling has clawed back this morning’s losses, and is now flat against the US dollar at $1.244.
Sterling rocketing to levels not seen for nearly 9 hours
— World First (@World_First) March 29, 2017
UK consumer credit keeps growing, but mortgages approvals fall
Brexit didn’t deter UK shoppers from hammering their credit cards last month, new data from the Bank of England shows.
UK consumer credit rose by £1.44bn in February, down from £1.6bn in January but higher than the £1.3bn which City forecasters expected.
It was driven by a 9.3% surge in borrowing on credit cards. That’s the fastest rate in over a decade, according to Ben Chu of the Independent who’s quickly crunched the data:
Credit card borrowing annual growth rate hits highest in 11 years in February according to Bank of England data pic.twitter.com/tnzOT5FQE3
— Ben Chu (@BenChu_) March 29, 2017
That may show confidence about economic prospects.... or it may show that people are struggling to make ends meet as inflation eats into their wages.
UK money data out. Bit of levelling off of consumer credit 12 month growth rate - but still high. https://t.co/nW86OyEgCw pic.twitter.com/VMTrMoo1C6
— Duncan Weldon (@DuncanWeldon) March 29, 2017
The report also shows a drop in mortgage approvals - from 69,114 in January to 68,315. That could be a sign that the UK housing market is cooling off.
Every currency trade has two sides, of course. And the pound’s dip against the US dollar today is related to US politics, as well as Brexit.
Kathleen Brooks, research director at City Index, argues that traders are wagering that Donald Trump can get to grips with the challenge of being president, and deliver some meaningful tax changes.
She says:
It’s worth pointing out that the pound actually rallied when Downing Street announced the date of the triggering of Article 50 last week, and the prospect of a second Scottish referendum didn’t impact the pound when it was first touted a couple of weeks ago. Thus, these events are not the key driver of the pound right now. Instead, we believe that the dollar recovery will be more important for the pound in the coming days.
The dollar index jumped by more than 0.5% and US stock markets closed higher for the first time in four days on Tuesday, led by financials, a sector closely aligned with Mr Trump’s success, suggesting that investors are willing to trust Trump again, as his policy team switch to tax reform after their failure to get their healthcare bill passed by the House of Representatives at the end of last week.
German stock market hits two-year high
Traders in Frankfurt are marking Brexit Day by driving the Germany’s stock market to its highest level in two years.
The DAX, which contains Germany’s biggest listed companies, has gained 0.6% today to 12,227 points, a level last seen in April 2015.
Financial companies and manufacturers are leading the rally, with Commerzbank jumping by 2.5%, Deutsche Bank gaining 1.5%, Daimler up 1.4% and Siemens 1.3% higher.
The historic fracturing of Britain’s links to Europe clearly isn’t dampening the mood on the trading floors.
Michael Hewson of CMC Markets says:
In the short term nothing much is likely to change, particularly at a politically sensitive time for Europe with French and German election campaigns already well under way, which means any market reaction is likely to be fairly muted.
Chris Bailey of analyst group Financial Orbit tweets:
Clearly in deep panic mode about #Article50
— Chris Bailey (@Financial_Orbit) March 29, 2017
"Germany’s blue chip #DAX index hit its highest level in almost two years on Wednesday"
Chancellor Philip Hammond has cautioned that Britain can’t expect to have its cake and eat it as it leaves the EU.
That means no membership of the single market, for example.
Hammond argues that Britain can still achieve ‘frictionless’ borders with Europe, though, as it’s not in anyone’s interest to have lines of lorries queued up at Dover.
He was speaking to Radio 4’s Today Programme, and Andy Sparrow’s Politics Live blog has all the details:
Updated
Ryanair warns of flight disruption after Brexit
Ryanair has issued a rather alarming warning this morning.
The budget airline told shareholders there is a “distinct possibility” of no flights between the UK and Europe from March 2019, when Britain leaves the EU, if the government fails to negotiate a Brexit deal for the aviation industry.
It urged the government to put the industry at the forefront of its divorce talks with the EU, to ensure that a new agreement is reached to replace Open Skies.
Ryanair said the options for the government are a new bilateral agreement with the EU to allow flights between the UK and Europe or a reversion to historical WTO rules, which do not cover aviation, and therefore risk a no-flights scenario.
As Westminster prepares to trigger Article 50 later today, Ryanair’s chief marketing officer, Kenny Jacobs said:
“With Britain planning to leave the EU and its Open Skies agreement, there is a distinct possibility that there may be no flights between the UK and Europe for a period of time after March 2019.
The best we can hope for is a new bilateral agreement between the UK and EU, however, we worry that Britain may not be able to negotiate such a bilateral in time for the release by airlines of summer 2019 schedules in mid-2018.”
Updated
Stocks rise across Europe in early trading
European stock markets are picking up this morning, as optimism over the global economy trumps Brexit uncertainty.
In London, the FTSE 100 has gained 20 points, or 0.25%, and there are larger gains in continental bourses.
No sign of Article 50 angst here:
Investors have shaken off their worries about US politics, after Republicans failed to win support for their healthcare changes. Instead, they’re hoping that Donald Trump can deliver his promised tax reforms.
Naeem Aslam of Think Markets says:
We do anticipate that doom gloom of Trump’s health care plan failure is going to fade soon, as it is the tax and infrastructure plan which matters the most. It is highly likely that Mr. Trump is going to check all the T&C before he makes the final run with the bill in the House.
This bill is going to become the centre of attention for the US markets which would drive the trading action.
“Brexit jitters” have returned to the markets this week, says FXTM research analyst Lukman Otunuga.
The Brexit jitters were revived on Tuesday evening with Sterling stumbling into steep losses after British Prime Minister Theresa May signed a letter notifying the EU of Britain’s plan to depart from the European Union.
With the game changing Brexit letter due to be delivered to Brussels on Wednesday afternoon marking a critical turning point and triggering one of the most intricate set of negotiations Britain and the EU have ever been presented, Sterling could be in store for a rocky rollercoaster ride.
It’s only two days since sterling was at a one-month high against the US dollar. No wonder traders joke about ‘playing the Forex’...
Sterling falls as Brexit process begins
The pound has dipped against the US dollar this morning.
Sterling fell as low as $1.2378 in early trading, down over half a cent, adding to the cent it lost yesterday.
That suggests there may be a twinge of Article 50 nervousness in the City (and beyond) this morning, as Theresa May’s formal letter triggering the exit process arrives in Brussels.
Traders will be watching for signals from Westminster, and Brussels, for how the Brexit negotiations will develop.
Sterling is likely to remain vulnerable as these talks get underway, as Neil Wilson of ETX Capital explains:
A truly hard Brexit has not been priced into sterling. We could see it move lower still if negotiations take a sour turn - $1.10 is feasible.
The old hard v soft Brexit debate is once again central to expectations for the pound. Sterling will rise on any indications of a softer Brexit and fall on any signs it’s going to be hard. If we head towards a cliff-edge then it could collapse.
We are likely to see a lot of toing and froing between the various Brexit scenarios. Theresa May has set the UK on course for a hard Brexit – no deal is better than a bad deal – but we can expect this to shift in due course once the EU sets out its stall.
The pound has also dipped against the euro, down 0.5% at $1.1495. Such a small move backs up the theory that the triggering of Article 50 is pretty much ‘priced in’.
Traders in Frankfurt will certainly be thinking about Brexit:
Sad #Brexitday! pic.twitter.com/SPt52gffZR
— Holger Zschaepitz (@Schuldensuehner) March 29, 2017
The agenda: UK consumer credit figures
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Unless you’ve been sheltering in a nice dark cave for nine months, you won’t need reminding of the main event today:
Today Britain steps
— Paul Johnson (@paul__johnson) March 28, 2017
Into the unknown
The Guardian pic.twitter.com/ZWaXDLvr1U
We’ll be live-blogging all that in Another Place, as they say in Westminster. And you’d think that the triggering of Article 50, although clearly historic, shouldn’t have a huge impact on the markets. The start of the Brexit process really ought to be priced in.
Markets focus is NOT the triggering of Article 50. It's media hype. It's not new news. No information change, should mean no price change.
— Polemic Paine (@PolemicTMM) March 29, 2017
However, investors can be fickle beasts, so we can’t rule out some volatility today as the months of shadow-boxing come to an end.
Britain’s economy has held up pretty well since last June’s referendum, mainly thanks to consumer spending. So the latest UK consumer credit figures, due at 9.30am, will be pored over for signs that people are cutting back.
At 3pm, new US home sales figures will give an insight into America’s economy, after consumer confidence hit a 16-year high yesterday. That’s followed by new oil inventory stats, which might shift the price of crude.
Updated
