May’s widely expected resignation barely moves UK stocks but Brexit risk lurks

British Prime Minister Theresa May leaves after delivering a statement in London, May 24, 2019. — Reuters pic
British Prime Minister Theresa May leaves after delivering a statement in London, May 24, 2019. — Reuters pic

LONDON, May 24 — Britain’s FTSE 100 held its gains today after Prime Minister Theresa May announced her resignation date in a widely expected move which nevertheless raises the prospect of a successor likely to seek a more hardline Brexit divorce deal.

The FTSE 100 was up 0.7 per cent by 1100 GMT and the midcap index rose 0.4 per cent, slightly off its opening levels, as traders and investors said the market had already priced in May’s resignation when rumours first started circulating.

Housebuilders, which are considered prone to any hit to the economy from a chaotic no-deal Brexit, barely budged after May’s speech.

“It’s been so well-flagged and UK assets have been hammered all week. Realistically we know no more or less than we did yesterday,” said a trader.

Housebuilders, retailers, domestic banks and other Brexit-sensitive stocks fell sharply earlier this week when pressure grew on May and investors grappled with the likelihood of Boris Johnson, who wants a tougher divorce deal, as her successor.

The former foreign secretary is favourite to win the Conservative party leadership contest, according to Oddschecker.

“Theresa May’s announcement... comes as no surprise, but it could lead to a chain reaction that will ultimately be negative for UK market sentiment,” said Seema Shah, senior global investment strategist at Principal Global Investors.

“At this stage the extreme results of either no deal or no Brexit seem more likely than a negotiated managed Brexit.”

Risk appetite more broadly returned to markets after US President Donald Trump predicted a swift end to the trade dispute with China.

Oil majors BP and Shell were the biggest boosts to the main index following gains in crude prices, while miners broke a four-day losing streak after copper prices rebounded as the dollar dipped.

Broadcaster ITV topped the FTSE 100 in early deals but its gains faded to just 0.7 per cent by 1045 GMT, after it signed a deal with the English Football Association that will make FA Cup matches entirely free-to-air to viewers from the 2021-22 season.

Mothercare was a standout gainer, up 11.3 per cent and on course for its best day in nine months after its annual report showed restructuring efforts were paying off.

Small-cap media firm Tarsus shot up by 37.2 per cent after European private equity firm Charterhouse said it had made a cash bid valuing the company at about 561 million pounds.

Concern over a potential no-deal Brexit, along with an escalation in the trade war between Washington and Beijing, have left the FTSE 100 on course for its first monthly drop this year. — Reuters

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