Stocks, sterling rise on long-awaited Brexit deal

Sterling, the key gauge of Brexit sentiment all along, jumped as much as a 1 per cent against the dollar, putting it on course for its best six-day gain in more than 30 years before the doubts and grumbles set in. — Reuters pic
Sterling, the key gauge of Brexit sentiment all along, jumped as much as a 1 per cent against the dollar, putting it on course for its best six-day gain in more than 30 years before the doubts and grumbles set in. — Reuters pic

LONDON, Oct 17 — A deal on Britain’s departure agreed with the European Union sent sterling to a five-month high today and hoisted European stocks to a year-and-a-half peak before doubts about UK parliamentary support hauled them back.

Wall Street rose as upbeat earnings from Netflix and Morgan Stanley affirmed a strong start to the US reporting season while the dollar fell against the euro as the common currency got a lift on the long-awaited Brexit deal.

While the British government and the EU may have reached a deal, the road ahead is unclear. The Irish border riddle remains a sticking point for Northern Ireland’s Democratic Unionist Party (DUP), which has withheld its backing.

That reduces the chances of British Prime Minister Boris Johnson winning parliamentary ratification at an extraordinary session of parliament on Saturday.

But after weeks of negotiations, an agreement being struck was welcomed by British and EU leaders.

“Where there is a will, there is a deal — we have one!” said European Commission President Jean-Claude Juncker as the news broke from Brussels.

Sterling, the key gauge of Brexit sentiment all along, jumped as much as a 1 per cent against the dollar, putting it on course for its best six-day gain in more than 30 years before the doubts and grumbles set in.

Market optimism faltered when the Northern Ireland party said it could not support the agreement, torpedoing hopes of a smooth passage through parliament.

Having ran up as far as US$1.2988 (RM5.43), sterling fell well under US$1.28 before regaining momentum to trade at US$1.2857, up 0.21 per cent on the day.

London’s benchmark FTSE index jumped 0.61 per cent as the pound slid but the broad-market pan-European STOXX 600 lost most of its gains, rising 0.17 per cent. The FTSEurofirst index of leading regional shares rose 0.17 per cent.

UK Gilts, German Bunds, gold and most other safe havens also rebounded after selling off.

Netflix Inc shares rose 2.3 per cent in heavy trade after the video streaming service provider added slightly more paying subscribers than Wall Street expected in the third quarter.

Morgan Stanley gained 3.1 per cent after the big lender beat analysts’ expectations for quarterly profit, buoyed by higher revenue from bond trading and M&A advisory fees.

Earnings season is dictating US market moves, which has historically been the case, said Kristina Hooper, chief global market strategist at Invesco.

“The buck stops with earnings,” Hooper said. “The good news is most earnings reports thus far have been positive and that’s provided some nice momentum for the market.”

The Dow Jones Industrial Average rose 48 points, or 0.18 per cent, to 27,049.98. The S&P 500 gained 10.07 points, or 0.34 per cent, to 2,999.76 and the Nasdaq Composite added 21.56 points, or 0.27 per cent, to 8,145.74.

Emerging-market stocks also gained for a sixth day — their longest winning streak since early April — after US Treasury Secretary Steven Mnuchin said US and Chinese trade negotiators were nailing down a Phase 1 trade deal text for their presidents to sign next month.

But US retail sales fell for the first time in seven months, suggesting manufacturing-led weakness was spreading to the broader economy. US consumption has been one of few bright spots in the global economy, so the data fanned concerns the trade war would ultimately tip the world into recession.

The dollar index fell 0.37 per cent, with the euro up 0.43 per cent to US$1.1118. The Japanese yen strengthened 0.20 per cent versus the greenback at 108.58 per dollar.

Oil prices fell as industry data showed a larger-than-expected increase in US inventories, though the drop was limited by the Brexit deal.

Brent crude futures fell 25 cents to US$59.17 a barrel. US West Texas Intermediate crude lost 24 cents to trade at US$53.12. — Reuters

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