There’s been a swift moving higher in Sterling this morning on the back of some market chatter that the EU parliament will call for the UK to have privileged single market access after Brexit. The appreciation has weighed no the FTSE with the index falling lower by more than 30 points and drifting back towards the 7200 handle after failing to make a sustained push over 7300 yesterday.
EU to soften Brexit stance?
The Brexit negotiations thus far have been frustrated in no small part by the EU adopting a stern stance and ceding very little ground to the UK. The latest developments however reveal some possible cracks in this hardline approach and are the clearest sign yet that the bloc may accept preferential terms as far as trade is concerned post-Brexit. The European parliament is believed to be preparing a detailed 60-paragraph resolution which will call for more flexibility in future relationship talks with Britain. The most positive part of this is a line which states that the Parliament want the EU to negotiate an association agreement which could give Britain “privileged” single market access and membership of EU agencies. The market reaction to the news was clearly positive for the Pound with the currency jumping as soon as the reports hit the wires and moving back above the 1.40 handle against the US dollar.
FTSE slips back to 7200
The rise in the pound has imparted a little more downward pressure on the leading UK index, with the FTSE 100 dropping lower after already being in the red on the latest rumours. Monday’s trade saw the benchmark revisit the post sell-off highs around 7300, but a failure to recapture these keeps the market under pressure. A bearish outside day on Monday produced a technical reversal signal and in breaking below the lows this morning the outlook remains fragile and unless the market can make a concerted move above 7300 then a revisit of the swing lows around 7000 could well lie ahead.
HSBC and BHP Billiton (LON:BLT) sink on disappointing results
Two of the biggest fallers on the FTSE this morning are HSBC and BHP Billiton with both experiencing a spate of selling after posting disappointing trading updates.HSBC has seen its stock fall by more than 4% and is on track for its worst one-day drop in a year after missing analyst forecasts in its latest set of results. The bank announced that net profits for last year had more than quadrupled but against lofty expectations these figures were below consensus and marked the first time in 7 quarters that the earnings missed forecasts. It’s a similar story as far as BHP Billiton is concerned, with a strong improvement in profits not deemed enough by investors who had hoped for even more. The miner’s 25% increase in underlying attributable profit saw the measure move above $4B for the six months to December and despite declaring a bumper dividend of $0.55 per share - up from $0.40 a year ago - the stock has been hit by a wave of selling. The share price has slipped almost 4% in early trade and after an impressive rise over the last couple of years the release may have led to some profit taking from investors who’ve seen the share price rise almost threefold since the beginning of 2016.