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Pound extends recovery amid Brexit drama
NEW YORK, Sept 5, 2019 (BSS/AFP) – The pound rebounded further on Wednesday
but its gains were capped as Brexit turmoil set the stage for a potential
snap British election next month.
Global stocks rose as well, with major indices surging higher as the
city’s leader Carrie Lam prepared to shelve a loathed extradition bill that
had sparked months of unrest.
In London, the pound shot back above $1.22 to show an increase of almost
one percent from late on Tuesday.
Having dived Tuesday to $1.1959 — the pound’s weakest level since 1985
except for a 2016 “flash crash” — it has since rallied on rising hopes that
Britain will not exit the European Union without a deal.
“Sterling was thrown a lifeline by a parliament determined to avoid a no-
deal Brexit,” said analyst Connor Campbell at trading firm Spreadex, but he
also injected a note of caution.
“The complicating factor here, and the reason that sterling’s gains… are
not even greater, is the potential for a general election.”
Prime Minister Boris Johnson has proposed holding a snap general election
on October 15 if lawmakers vote against him late on Wednesday and force him
to seek a three-month Brexit extension from Brussels.
However, later on Wednesday lawmakers rejected Johnson’s motion for a
general election, holding off the at least for now.
Many economists argue that a no-deal departure could hammer the British
economy, which already risks falling into recession this quarter.
British business activity shrank in August, slammed by weakness in the
construction, manufacturing and services sectors, a survey showed Wednesday.
The purchasing managers’ index figures “are so far indicating a 0.1-
percent contraction of GDP in the third quarter,” which would mean Britain
had fallen into recession, noted Chris Williamson, chief business economist
at IHS Markit, which compiles the data.
Britain’s economy declined in the second quarter of the year, and one
standard definition of recession is two successive quarters of economic
contraction.
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– Hong Kong stocks soar –
The other big story on Wednesday was in Asia, where Hong Kong’s stock
market surged by 3.9 percent.
Shares rallied on the Hang Seng Index, with property and retail firms
among the best performers, having taken a hiding over the past few weeks as
demonstrations were increasingly marred by violence.
Later in the day, Hong Kong’s embattled leader confirmed that she would
permanently shelve an extradition bill that lit the fuse for three months of
pro-democracy protests.
“The government will formally withdraw the bill in order to fully allay
public concerns,” pro-Beijing chief executive Lam said in a video statement.
Withdrawing the bill is one of the five key demands of protesters, who
have taken to the streets in their millions in the biggest challenge to
China’s rule of Hong Kong since its handover from the British in 1997.
Meanwhile, oil prices surged as well in late European trading.
– Key figures around 2100 GMT –
Pound/dollar: UP at $1.2241 from $1.2081 at 2100 GMT
Euro/pound: DOWN at 90.13 pence from 90.83 pence
Euro/dollar: UP at $1.1033 from $1.0974
Dollar/yen: UP at 106.41 yen from 105.94 yen
New York – Dow: UP 0.9 percent at 26,355.47 (close)
New York – S&P 500: UP 1.1 percent at 2,937.78 (close)
New York – Nasdaq: UP 1.3 percent at 7,976.88 (close)
London – FTSE 100: UP 0.6 percent at 7,311.26 points (close)
Frankfurt – DAX 30: UP 1.0 percent at 12,025.04 (close)
Paris – CAC 40: UP 1.2 percent at 5,532.07 (close)
EURO STOXX 50: UP 0.9 percent at 3,450.83 (close)
Hong Kong – Hang Seng: UP 3.9 percent at 26,523.23 (close)
Shanghai – Composite: UP 0.9 percent at 2,957.41 (close)
Tokyo – Nikkei 225: UP 0.1 at 20,649.14 (close)
Brent North Sea crude: UP $2.44 at $60.70 per barrel
West Texas Intermediate: UP $2.32 at $56.26
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