It’s been a busy morning for UK assets with two major events seeing heightened volatility in the pound and stock markets. With the latest Bank of England decision and quarterly inflation report still to come “Super Thursday” has so far lived up to its billing.
MPs to vote on Brexit
Today’s revelation that the UK must hold a vote in parliament before starting the two-year negotiation window on the terms of a Brexit has sent shockwaves through the markets and seen the pound rally, with the currency moving up to its highest level in almost a month against the US dollar. The decision from the High Court in London was announced just under an hour ago and seen some strong selling in stocks with the FTSE 100 falling to its lowest level since the end of September - when PM Theresa May announced that Article 50 would be triggered by March 2017 at the latest. The round trip in the market over the past five weeks has seen the blue chip index rise to an all-time high and whilst today’s ruling is unlikely to alter the outcome of the UK leaving the EU it could well delay the process and lead to a longer period of uncertainty in the interim.
Economic data takes a back seat
With the latest political developments very much in the driving seat as far as UK sensitive assets are concerned, economic data now seems to be playing second fiddle in dictating trade flows. The release of a survey amongst purchasing managers in the services sector this morning came in better than expected with the index rising to 54.5 for October compared to 52.6 for the previous month. Following the publication of the equivalent readings seen in the last two days for the manufacturing and construction sector, the overall economy seems to be performing relatively well and shows little adverse effects since the EU referendum. However as today’s High Court ruling showed, in terms of driving forces on the markets politics is very much usurping economics for the time being.
Gold stocks decline
After a strong recent run Randgold Resources (LON:RRS) and Fresnillo (LON:FRES) are seeing some fairly strong selling today as the price of Gold bullion is lower on the session after an impressive rise of almost $50/oz in the past five trading days. Glencore (LON:GLEN), Anglo American (LON:AAL) and Rio Tinto (LON:RIO) are also experiencing downside with the mining sector as a whole coming under pressure. These declines have contributed to the overall index falling into negative territory with the FTSE 100 off by 22 points on the day. Despite the overall move for the market there are some bright spots with Dixons Carphone (LON:DC) seeing its stock rise by more than 5% following some broker upgrades. Airline stocks are also looking to continue their recent rise with easyJet (LON:EZJ) and International Consolidated Airlines both firmly in the green.