The pound fell sharply yesterday after Prime Minister Theresa May announced Britain was seeking a delay to its exit from the European Union until June 30, while investors awaited the US Federal Reserve’s interest rate call.
“The pound’s Wednesday only got worse after the confirmation that Theresa May is seeking a short delay from the EU, one that arguably does not give the government enough time to get through a sterling-positive Brexit deal,” Spreadex analyst Connor Campbell told AFP.
“It appears that, despite the various votes highlighting MPs unwilling to leave the EU without a deal, that kind of disastrous exit is still very much on the table.”
The pound lost about half a pence in the space of roughly 10 minutes after May announced the delay, falling to $1.3147, bringing its loss for the day to around 1%. May had been widely expected to ask the bloc for an extension of the March 29 deadline for leaving, having seen her exit proposals twice rejected by MPs.
The European Commission, for its part, warned EU leaders in an internal briefing note ahead of an summit in Brussels that delaying Brexit to June 30 would bring “serious legal and political risks”. It urged a shorter postponement to before European Parliament elections in May, or a much longer one at least till the end of this year.
European Council president Donald Tusk said that EU leaders could approve a short delay to Brexit if British lawmakers finally approve the withdrawal deal they have twice rejected.
Investors eyed China-US trade talks, optimism about which have helped propel equities higher across the world this year — offsetting concerns about the outlook for the global economy,
But dealers have been spooked by a report that some US officials are feeling some pushback from China on a number of demands, including on the crucial issue of intellectual property.
The unnamed negotiators said the Chinese side was growing concerned at the lack of assurances that US duties would be removed, according to the Bloomberg story.
In Europe, Frankfurt fell the heaviest with Bayer shares tumbling after a US jury ruled its weedkiller Roundup was a “substantial factor” in an amateur gardener’s cancer.
Frankfurt stocks meanwhile sank 1.6% as the threat to German giant Bayer and its subsidiary Monsanto from US litigation swelled.
A wave of lawsuits has put pressure on Bayer since its $63bn takeover of Monsanto last year, spooking investors who worry damages payouts could escalate if the firm fails to convince courts its product is safe.
“Bayer shares have sold-off sharply...after a US jury found that the company’s weed killer, Roundup, caused cancer,” said CMC Markets analyst David Madden.
“This could open the floodgates to further cases, and the group might have to set aside vast sums of money for potential cases.”
Bayer finished the day down 9.6% at €63.
In London, the FTSE 100 closed down 0.5% to 7,291.01 points; Frankfurt — DAX 30 ended down 1.6% to 11,603.89 points and Paris — CAC 40 closed down 0.8% to 5,382.66 points yesterday.
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