|Day's Range||7,146.11 - 7,197.14|
|52 Week Range||6,536.50 - 7,727.50|
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.The weekend’s developments in the U.K.’s path to exit the European Union have left equity and sterling investors with yet more uncertainty, with outcomes ranging from a delay, a chaotic departure or -- if Prime Minister Boris Johnson succeeds in his latest plan -- an exit with a deal on Oct. 31.“Financial markets closed last week on an optimistic tone with hopes of resolution and certainty to the Brexit outlook. These hopes have been dashed,” said David Page, Senior Economist at AXA Investment Managers. The pound may see “knee-jerk weakness” on Monday, according to AMP Capital Investors Ltd., while the U.K.’s domestically-exposed FTSE 250, which gained 5.2% over the past six trading days, will also be in focus.Still, losses for the pound and U.K. domestic equities may be limited as a no-deal exit looks less likely, according to Credit Agricole strategists, who recommend using sterling dips as a buying opportunity.With another dramatic week in U.K. politics ahead, here’s what market participants are saying about the latest developments.Alberto Tocchio, Colombo Wealth SA“We are back to square one unfortunately and the market is not going to like it on Monday. The pound will fall back after recent strength and European markets should lose at least 1%.”“On the positive side, Chinese top trade negotiators said that talks with U.S. are making progress and both sides are working toward a partial trade deal. This might partially offset the negative side effect of no-Brexit deal on Monday.”David Page, AXA Investment Managers“Gains in sterling, mid-cap equities and U.K. gilt yields look likely to face an early retracement over the coming week. Insofar as broader global assets, including U.S. Treasury yields had also moved on these developments, we can expect to see some retracement of these moves as well.”“Volatility associated with Brexit uncertainty looks set to remain elevated over the coming two weeks at least. However, we continue to view the prospect of a “no deal” exit on 31 Oct. as unlikely and an eventual extension to Article 50 still, on balance, appears the most likely outcome.” Oliver Harvey, Deutsche Bank“The next focus for the market will be votes next week on the legislation needed to implement the government’s Withdrawal Agreement. There will be a second opportunity for MPs to get the deal done. We retain our constructive outlook on the U.K., and long sterling and short U.K. real yield recommendations.”Joshua Mahony, IG GroupThe Letwin vote has been seen as a proxy for the meaningful vote on Johnson’s Brexit deal, so “markets are understandably treating this result with disappointment.”“It has been clear that there is no majority in Parliament for anything other than opposition for a no-deal Brexit, and thus it is evident that Brexit could yet only occur once we have seen a general election. For traders, the hope of greater certainty has been dashed, with Parliament looking ever more likely to push for an extension into 2020.”Stephane Barbier De La Serre, Makor Capital Markets“The (weekend’s) developments by no means imply that Brexit will necessarily not happen by Oct. 31. It just strongly increases the odds of further status quo aka uncertainty, the thing markets just hate the most.”He expects in coming days U.K. stocks to “brutally relinquish most of their recent gains”, with FTSE 250 down about 5%, while FTSE 100 to be more or less unchanged, cushioned by exporters’ negative correlation with the pound.\--With assistance from Kit Rees and Macarena Munoz.To contact the reporters on this story: Sam Unsted in London at firstname.lastname@example.org;Ksenia Galouchko in London at email@example.com;Joe Easton in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Beth Mellor at email@example.com, Blaise RobinsonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
It’s another big week for the global financial markets, Corporate earnings, Brexit, trade and economic data in Focus. It’s also Draghi’s last media show…
(Bloomberg) -- Boris Johnson is talking to MPs as he tries to build a majority in Parliament for the Brexit agreement he reached with the European Union on Thursday. But rebels expelled from his own Conservative Party are moving to postpone the decisive vote -- forcing the prime minister to seek a further extension from the bloc.French President Emmanuel Macron added to the pressure on MPs weighing how to vote when he told reporters in Brussels that a further extension shouldn’t be granted if Parliament rejects the deal.Must read: Two Crisis Phone Calls Unlocked the ‘Impossible’ Brexit DealKey DevelopmentsJohnson meeting with cabinet in LondonJohnson Sells Brexit Deal to Parliament Before Knife-Edge VoteDUP reaffirms its 10 MPs will vote against Johnson’s dealJudge Rejects Bid to Block Saturday’s Debate (5:35 p.m.)A Scottish judge rejected an attempt by legal activist Jolyon Maugham to block Saturday’s vote. The lawyer, who successfully got the courts to quash the prime minister’s prorogation of Parliament, had sought to argue that Johnson’s plans violated an existing law that prevents Northern Ireland being put in a separate customs union to the U.K.Hammond Seeks Assurances (5:25 p.m.)Former Chancellor of the Exchequer Philip Hammond warned he can’t back Johnson’s deal in its current form because it could be used to trigger a no-deal Brexit in 2020.Writing in The Times of London, Hammond says he wants assurances from the prime minister that the government won’t crash the U.K. out of the EU without a deal at the end of the transition period.“I haven’t come this far seeking to avoid no deal in 2019 to be duped into voting for a heavily camouflaged no-deal at the end of 2020,” he wrote. “But I am not a lost cause!”Labour MPs Propose Referendum Amendment (4:40 p.m.)Labour MP Peter Kyle has proposed an amendment that would give Parliament’s backing to a referendum on any deal agreed with the EU.The proposed change is to a motion requesting Parliament’s permission to leave without a deal which might be proposed by the government on Saturday if it fails to win backing for Boris Johnson’s agreement.“Tomorrow government will ask us to vote on two motions. First, on the new deal. Second, if that fails, for permission to leave with no deal,” Kyle said. “Should the deal fail to get a majority, MPs will move forward and be given the chance to vote” for the amendment, he said. However, ministers could opt not to move the no-deal motion.The proposed change would add to the motion that Parliament “rejects leaving the European Union without a deal and believes that any final decision on the future relationship between the U.K. and the EU should be subject to a confirmatory referendum before exit day,” Kyle said in a posting on Twitter.Letwin Says Amendment is ‘Insurance’ (4:15 p.m.)Former Tory minister Oliver Letwin said he will back Johnson’s deal and his amendment (see 3:15 p.m.) is simply an insurance policy to stop the U.K. accidentally crashing out without a deal if the necessary legislation isn’t completed in time.“My aim is to ensure that Boris’s deal succeeds, but that we have an insurance policy which prevents the U.K. from crashing out on Oct. 31 by mistake if something goes wrong during the passage of the implementing legislation,” Letwin said in an email. “Nothing in my amendment or in the Benn Act itself in any way delays the actual departure of the U.K. from the EU immediately following the ratification of the Withdrawal Agreement.”SNP Indicates Support for Vote Delay (3.30 p.m.)Nicola Sturgeon, leader of the Scottish National Party, suggested her party would vote for a proposal to delay the vote on Johnson’s deal until after Saturday. The amendment, drawn up by former Tory Oliver Letwin and Labour’s Hilary Benn, would withhold approval for the Brexit deal until the bill which implements it is law (see 3:15 p.m.).“We will ultimately vote against this deal but we would be sympathetic to something that would make sure it doesn’t get through tomorrow,” Sturgeon told reporters in London. She said an extension to the Oct. 31 deadline followed by a general election or a referendum would be her preferred outcome.Saturday May Not Seal the Deal (3:15 p.m.)Boris Johnson may not even get the chance to put his Brexit deal to the vote on Saturday, with support growing for a move by an alliance of former Conservatives and opposition Members of Parliament to delay the decision by a week or more.Former Tory minister Oliver Letwin and Labour MP Hilary Benn have put down an amendment to Johnson’s motion which would withhold approval for the Brexit deal until the bill that implements it is law.If it is passed, Johnson would be unable to put his deal to the vote, leaving him in a situation where he’s obliged by law to seek a delay to Brexit.Don’t Assume EU Extension, Varadkar Says (2:30 p.m.)U.K. lawmakers should not assume the EU would grant another Brexit extension if it’s requested, Irish Prime Minister Leo Varadkar warned, noting such a move would need unanimous consent from EU members. The current proposal is the final offer, he added.Speaking to reporters in Brussels, Varadkar said he “cannot see the European Union coming back for another set of negotiations” if the British Parliament rejects this plan. Asked what the alternative is if this deal is shot down in Westminster, he responded that “plan B is no deal.”Macron Says U.K. Mustn’t Get Delay If Vote Fails (2 p.m.)French President Emmanuel Macron said the U.K. should not get another extension to the Brexit process if Boris Johnson loses the vote on his Brexit deal in Parliament on Saturday.“I don’t think a new extension should be granted,” Macron said at a press conference after a summit of EU leaders in Brussels. “The Oct. 31 deadline must be met.”BNP: U.K. Stocks Could Drop 10% If Vote Lost (12:20 p.m.)Stocks with heavy exposure to the U.K. economy could wipe out the rally seen over the past week if MPs reject Boris Johnson’s Brexit deal on Saturday, according to BNP Paribas.The bank forecasts downside of as much as 10% for the FTSE 250 index in such a scenario, with the exporter-heavy FTSE 100 gaining amid weaker sterling, strategists including Edmund Shing wrote in a note to clients.Johnson Goes on Charm Offensive (12 p.m.)With Saturday’s vote looking incredibly tight, Boris Johnson and his team are spending the day trying to persuade MPs from all parties to back his Brexit deal.Labour MPs are being offered more assurances on workers’ rights in the Withdrawal Agreement Bill, which would be brought to Parliament next week if Johnson wins on Saturday, according to a person familiar with the discussions.The Prime Minister’s personal focus is on winning around hard line Brexiteers in the European Research Group, and that operation is starting in earnest today, the person said.The government currently thinks about 17 or 18 of the 21 rebels who were expelled from the Tory party last month will back the deal, the person said. Many of them are seeking a way back into the party and want assurances any MP who votes against the government this time around will also be expelled.DUP Affirms Opposition to Deal (10:30 a.m.)Sammy Wilson, the DUP’s Brexit spokesman, extinguished any hopes his party will pivot toward supporting Johnson’s deal. “We will definitely be voting against it,” he told Sky News.Wilson said he’s disappointed Johnson “folded to the unreasonable demands of the EU,” especially since the DUP had given him a “fair degree of latitude” on temporary Northern Irish regulatory alignment with Europe.While acknowledging tariffs on goods coming into Northern Ireland from the U.K. would be refunded if they are proven not to have entered the Republic of Ireland, Wilson said the cash-flow problems this would create for local businesses would be damaging.At Least 10 Labour MPs Back Deal, Mann Says (Earlier)As speculation mounts over the way votes will fall on Saturday, Labour’s John Mann said at least 10 Labour MPs are likely to vote for Johnson’s deal. Asked on Ireland’s RTE radio how many of his party would back Johnson’s Brexit proposal, Mann responded that he expected the total to be in the “double digits.”Mann, who will vote for the plan, supported former prime minister Theresa May’s deal and is a vocal critic of Labour leader Jeremy Corbyn, who has called for Labour MPs to reject the deal.Earlier:Johnson Sells Brexit Deal to Parliament Before Knife-Edge VoteLondon Bankers Ready for Wave of Debt Deals If Johnson Wins Vote\--With assistance from Peter Flanagan, Joe Easton and Helene Fouquet.To contact the reporters on this story: Robert Hutton in London at firstname.lastname@example.org;Jessica Shankleman in London at email@example.com;Greg Ritchie in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Tim Ross at email@example.com, Thomas PennyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Conflicting Brexit headlines keep coming and Boris Johnson’s ability to pull off a deal remains in doubt. But this isn’t stopping stock investors from taking a bet on the U.K. economy.The Vanguard FTSE 250 UCITS exchange-traded fund, which tracks the index of mid-cap companies that are more sensitive to domestic growth and benefit when sterling is stronger, has attracted about 81 million pounds ($104 million) so far this week, the largest inflow since January, according to data compiled by Bloomberg.Ever since speculation emerged on Tuesday that the European Union and the U.K. are nearing a deal, the ETF’s underlying FTSE 250 Index has been outpacing its FTSE 100 counterpart of larger companies, many of which are international exporters that suffer when the pound rises. This is also visible in fund flows, with the iShares Core FTSE 100 UCITS ETF attracting just 14 million pounds since Monday, down 85% from the previous week.“The FTSE 250 is more domestic and benefits from improved domestic growth prospects,” said Lars Kreckel, global equity strategist at Legal & General Investment Management in London. “It’s reflecting the changing probabilities” of a Brexit deal.JPMorgan Chase & Co. strategists Mislav Matejka and Prabhav Bhadani raised U.K. domestic stocks to overweight on Monday, saying they appear attractively priced and can ride increased consumer confidence and corporate spending as clarity over Brexit grows.Consumer ConfidenceIf Johnson succeeds in getting the Brexit deal through Parliament on Saturday, BNP Paribas strategists including Edmund Shing say that the FTSE 250 will rise at least 5%. They estimate a drop of as much as 10% if the deal falls through.It’s an important turning point for scorned U.K. equities that are the most vulnerable to the state of economic growth. Prior to this week, Vanguard’s FTSE 250 ETF had barely seen any inflows since June, whereas record flows were heading to BlackRock Inc.’s FTSE 100 ETF.Investors have been avoiding U.K. equities for years and the country’s stock market is the least popular in the world, according to the latest Bank of America fund manager survey released on Tuesday. In a monthly poll that ended Oct. 10 -- before the optimistic Brexit deal reports -- respondents forecast British stocks as having the lowest chance of outperformance among major equity markets over the next decade.U.K.-focused equity funds saw their first weekly inflows in a month in the seven days through Oct. 16, attracting $184 million, according to EPFR Global data.Despite the ETF inflows and a brief rally, uncertainty continues to haunt U.K. stock traders. Johnson is now battling to sell his new Brexit deal to skeptical members of the U.K. Parliament before a crucial vote on Saturday. French President Emmanuel Macron added to the pressure when he told reporters in Brussels that a further extension shouldn’t be granted if Parliament rejects the deal.(Updates with weekly flows data from EPFR in the penultimate paragraph.)To contact the reporter on this story: Ksenia Galouchko in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Blaise Robinson at email@example.com, John Viljoen, Jon MenonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Stocks rise on the back of a new Brexit deal but the highs were not held, Parliament and the EU still need to accept the arrangement to stave off a hard-Brexit.
Equities rallied on the news as well as the British Pound, which jumped more than 1%. At the same time, investors dumped their hedge protection, leading to weakness in the Japanese Yen, Gold and U.S. Treasury bonds. The U.S. Dollar is also getting crushed against a basket of currencies.
The pan-European STOXX 600 index closed down 0.1% after gaining as much as 0.9%, as investors initially cheered news that the European Union and Britain had clinched a deal on the terms of Britain's exit from the bloc. Shares in domestically focused British companies and Irish firms, which have come to be seen as a barometer on Brexit sentiment, gave up gains as the Northern Irish Democratic Unionist Party (DUP) said it would vote against the accord at an extraordinary session on Saturday. The FTSE midcap index closed up just 0.16%, while Irish stocks dropped 0.9% amid doubts over whether Prime Minister Boris Johnson will be able to win the British parliament's approval for any deal.
Investing.com -- There's a Brexit deal in the offing, although it still needs to be approved by a recalcitrant British parliament. The pound and other U.K. and European assets are responding with enthusiasm. Elsewhere, Netflix (NASDAQ:NFLX) is set for a pop after stronger-than-expected earnings in the third quarter, even though subscriber growth again fell short of expectations. There are also regular updates on U.S. industrial production and the housing market, while oil is struggling after a big build in U.S. crude stocks last week. Here's what you need to know in financial markets on Thursday, 17th October.
The FTSE 250 , which had rallied more than 3% since last week on hopes that Britain could clinch a timely divorce deal, fell 0.9%. Traders are eyeing a crunch summit this week after last-ditch talks between London and the European Union. Barratt , Britain's largest housebuilder, gave up 3.7%, while peers Persimmon and Taylor Wimpey lost around 3% each.
Investing.com -- Bank of America (NYSE:BAC) leads a parade of more financial earnings, after JPMorgan (NYSE:JPM) stood out among a mediocre set of results from Wall Street on Tuesday. Drug wholesalers are in talks to settle opioid-related claims for $18 billion, while the hoped-for Brexit deal has hit a roadblock. Here's what you need to know in financial markets on Wednesday, 16th October
(Bloomberg) -- When it comes to Brexit, investors have endured three years of deadlines and disappointments. Now with a finish line tantalizingly in sight, they have switched from expectations it could last forever to perhaps pricing the endgame.As talks toward a deal enter overtime, negotiators from Britain and the European Union will still need official approval for any accord, and on the U.K. side that means Prime Minister Boris Johnson must win the support of Parliament. It could prove a formidable challenge, yet across multiple asset classes optimism is surging.Here’s a look at what’s happening in some key markets:Domestic StocksThanks to their exposure to the U.K. economy and inability to benefit from currency weakness, domestically-focused British companies are seen most at risk from a hard Brexit. As investors bet these businesses have had a stay of execution, the FTSE 250 Index -- seen as the more domestic stock gauge -- has surged in the past week and closed Tuesday at the highest in more than a year.On a percentage basis the gauge has gained more than five times the exporter-heavy FTSE 100 Index in the period.Pound OptionsInvestors in options are looking for the pound to rally in the run-up to the Oct. 31 deadline, with contracts that confer the right to buy the currency (calls) trading at a premium to those offering the right to sell (puts). The below chart shows the prices of options that expire in two and three weeks -- the lines slope up toward the right, where the calls are plotted.Overall, options signal that the pound will trade between $1.3490 and $1.3925 with more than 95% certainty over the next two weeks should a divorce deal be closed. It traded Wednesday in Asia at $1.2751.Pound VolatilityMeanwhile, the currency’s volatility surface, which just a week ago showed a marked preference for options that fall due in December, has now inverted. In plain English? Seven days ago traders thought the key Brexit events were weeks away, yet now they’re clamoring for options that mature in one week.The image above once again plots calls and puts, but adds an extra dimension: Time. All the action -- in both puts and calls -- has shifted to the near term.Bank BondsBrexit has left a trail of victims in the credit market, but resurgent bank capital securities hint the endgame may be here. A 1.25 billion-pound ($1.6 billion) issue from Barclays Plc of callable contingent convertible bonds surged to the highest since May 2018 Tuesday. The asset class is designed to help transfer the risk of bank rescues to bondholders instead of taxpayers, and has been battered amid fears financial services would be disrupted by a disorderly U.K. exit.Corporate CreditAt JPMorgan Chase & Co., the credit strategists are so confident the country will avoid crashing out they have closed out their Brexit hedge, a group of default swaps on companies most vulnerable to an isolated British economy.Fear is subsiding in Europe, too. The cost to insure high-yield, euro-denominated corporate bonds fell by the most in more than three weeks on Tuesday, according to Markit‘s iTraxx indexes. For investment-grade debt it was the biggest drop in a month.\--With assistance from Vassilis Karamanis.To contact the reporters on this story: Samuel Potter in London at firstname.lastname@example.org;Ven Ram in London at email@example.com;Cecile Gutscher in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Samuel Potter at email@example.com, Cormac Mullen, Joanna OssingerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
JP Morgan's UK domestic plays index , which tracks about 30 UK stocks that make all or most of their revenue at home, rose 1%. Britain and the European Union are set for crunch Brexit talks at a summit on Thursday and Friday, with Prime Minister Boris Johnson intent on delivering Brexit on Oct. 31 and the EU still looking for further concessions.
This week will be critical for the British currency, which may result in increased volatility of sterling both downwards and upwards. Right now, positive market sentiment supported by hopes for approval of the UK exit from the EU.
The pound enjoyed its best week since 2017 last week after British Prime Minister Boris Johnson and Irish counterpart Leo Varadkar said they could see "a pathway" for an agreement for Britain to leave the European Union by Oct. 31. While Brexit has cast a cloud over world markets since the June 2016 referendum resulted in a narrow win for Leave, some assets are particularly sensitive to headlines and will show an outsized reaction, whatever the outcome of the talks. Sterling's exchange rate has been by far the most sensitive price to Brexit newsflow.
Investors took no chances upon hearing the news. Besides driving stocks lower and erasing some of Friday’s gains, hedgers drove December Treasury Notes 0.46% higher. December Comex gold futures rose 0.73% and the Japanese Yen jumped 0.24% higher. These protection moves are likely to increase if investors continue to turn sour on the deal.
The FTSE 250 ended slightly off the day's lows but still shed 0.6%, handing back part of the more than 4% gain it had recorded in the previous session which was its best in nearly a decade. Britain and the European Union said over the weekend that a lot more work would be needed to secure a Brexit agreement. JP Morgan's UK domestic plays index , tracking about 30 UK stocks that make all or most of their revenue at home, pulled back nearly 1%.
Europe’s stock markets were brought down to earth on Monday by Chinese data that showed how much economic activity has slowed reminding participants that it will need more than grand words and handshake deals to revive a global economy hobbled by various trade-related uncertainties.
It is a big week ahead, with corporate earnings, trade talks, Brexit and economic data in focus. There’s also the IFM meetings and the EU Summit.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.U.K. domestic stocks may shake off their pariah status as beaten-down banks, housebuilders and retailers would be the biggest winners if the U.K. and European Union agree a deal on Brexit before the U.K. is scheduled to leave the bloc on Oct. 31.After a red-letter day for U.K.-exposed stocks on Friday amid signs of progress in talks, all eyes turn to next week’s EU Summit. The U.K.’s FTSE 250 index closed the week 4.2% higher, posting its best day since May 2010.“If there was a Brexit deal, political uncertainty would be reduced, sterling would appreciate, and that would be naturally positive for U.K. domestics and negative for international companies,” Matthew Hall, portfolio manager at Allianz Global Investors, said in an interview, adding that housebuilders and U.K. banks should see the biggest gains.With a crucial few days ahead, here’s a roundup of some of the biggest stock-market winners -- and losers -- if a Brexit deal is clinched:U.K. BanksU.K. high street lenders have been among the stocks hardest hit by Brexit uncertainty, and analysts at Citigroup Inc. predicted in August that a no-deal scenario could cut their earnings by as much as 25%.Both Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc’s shares surged on Friday. RBS -- the “poster child” of no-deal risk fears, according to Bloomberg Intelligence’s Jonathan Tyce -- rallied as much as 16%, the most in almost a decade.Even after Friday’s jump, RBS shares are still down about 13% since the referendum, while Lloyds is down about 18%. A deal would clarify the risk around small and medium-size enterprise lending, Tyce said in a note, while also preventing a Labour victory in any potential election as well as further rate cuts by the Bank of England.U.K. MidcapsSmaller U.K. companies would also benefit from a deal. This summer saw a string of British companies warn of the impact Brexit will have on their businesses, including firms such as recruitment agency PageGroup Plc, car dealer Pendragon Plc and property firm Savills Plc, while Thomas Cook Group Plc, a stalwart of the travel world, went bankrupt.Among other FTSE 250 members, Dixons Carphone Plc and Card Factory Plc have been hit by the slowdown in spending weighing on Britain’s high street, and are down 70% and 51% respectively since the Brexit vote. The worst-performer in the Index, subprime lender Provident Financial, has shed more than 80% as more customers have struggled to repay while it grapples with U.K. regulatory probes into its lending practices.HomebuildersBritish housebuilders have been under pressure amid Brexit uncertainty and Morgan Stanley predicted last month that the group could gain 20% if a deal was reached, or drop 18% in a no-deal scenario.Crest Nicholson Holdings Plc, which focuses on London and the surrounding commuter areas, has plummeted 31% since the referendum, while FTSE 100 member Taylor Wimpey Plc, also with big operations in the capital, has dropped about 15%.“We believe Taylor Wimpey is best-placed amongst U.K. housebuilders to gain from a post-Brexit market bounce back,” HSBC Holdings Plc’s Brijesh Siya wrote Oct. 9, citing the company’s strategy of building large sites and its potential to cut costs.RetailersU.K. retailers have suffered as consumers curtailed spending amid uncertainty about how the economy would fare. The FTSE 350 General Retailers Index is down about 20% since the Brexit referendum.With more clarity, consumer and business confidence would both rise and the whole retail sector would benefit, Shore Capital analyst Clive Black said. Supermarkets would feel the impact of a stronger pound more quickly than non-food retailers, given they have shorter lead times on buying products from overseas, with Marks & Spencer Group Plc and Tesco Plc likely among the biggest beneficiaries.UtilitiesUtilities investors have been hoping to avoid a Jeremy Corbyn government. The Labour leader has vowed to nationalize swathes of Britain’s water and energy firms, along with the railways and postal group Royal Mail Plc.If a Brexit deal increases the Conservative Party’s chances of winning an election, that could be positive for the sector. RBC Europe analyst John Musk wrote last month that an election would be a chance to scrutinize Labour’s “unchecked rhetoric” on the sector.National Grid Plc and United Utilities Group Plc are among the utilities stocks to watch. They’re down 17% and 10% respectively since the 2016 vote.ExportersOn the other hand, if a deal is cemented, the resulting gain in the pound may negatively impact exporters to the U.S., which have benefited from the currency’s weakness against the dollar. Analysts at Morgan Stanley said in August that U.K. drugmakers GlaxoSmithKline Plc and AstraZeneca Plc would benefit from a no-deal scenario and could see their valuations lowered by 8% and 11%, respectively, if a deal is reached.A strong pound is also negative for Diageo Plc, which slumped as much as 4% on Friday. Every 1% move against the dollar is worth about 0.5% of the London-based beverage giant’s earnings per share, Jefferies analyst Ed Mundy said in an email.Other stocks to watch include British American Tobacco Plc, Reckitt Benckiser Group Plc and Victrex Plc.To contact the reporters on this story: Kit Rees in London at firstname.lastname@example.org;Joe Easton in London at email@example.com;Erin Roman in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Celeste Perri at email@example.com, Beth MellorFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- It’s that Friday feeling. The mood is turning decidedly upbeat in the market, with glimmers of hope for two sagas that have plagued European stocks this year -- trade talks and Brexit.As the week began, equities were coming off the worst slump since August, the trade war was heating up with the U.S. blacklisting Chinese tech giants, and U.K. Prime Minister Boris Johnson had deemed a Brexit agreement by the end of the month “essentially impossible.” Fast forward to Friday, and equities are poised for their biggest weekly rally since mid-March.The Stoxx Europe 600 Index traded 1.9% higher as of 4:02 p.m. CET, the biggest gain since January. Despite the rout at the start of October, the gauge is now less than 1% away from a one-year high reached last month. The coming days will confirm whether investors’ optimism is warranted, and provide catalysts for further stock market moves.“The slightest glimmer of hope literally gives the stock market wings and all worries and crises seem to have been forgotten,” Andreas Lipkow, strategist at Comdirect Bank, said by phone. “It remains to be seen if the very high expectations can be met. As after any big party, the headache on the following morning can be equally painful.”The gains were even more pronounced for U.K.-domestic stocks, boosted by hopes the U.K. may reach a deal with the EU on Brexit. The pound has been surging since Irish Premier Leo Varadkar said Thursday that he believed an agreement is possible by the Oct. 31 deadline, following two-and-a-half hours of “constructive” talks with Prime Minister Boris Johnson. On Friday, EU Chief Negotiator Michel Barnier recommended that detailed talks can begin in earnest.The FTSE 250 was up 3% on Friday, the most since July 2016, with Royal Bank of Scotland Group Plc jumping 16% and Marks & Spencer Group Plc climbing 11%. The FTSE 100, home of multinationals such as BP Plc and GlaxoSmithKine Plc, was only up 0.5%, hurt by the rally in the pound.“What we see today is mostly short-covering in cyclical sectors and financials,” said Markus Steinbeis, managing director at asset manager Steinbeis & Haecker in Munich, adding that the rally could last for a little while, given the attractive valuations and the significant underweight in these value stocks among investors.The September fund manager survey from Bank of America showed the U.K. has been the least-favored region by investors in terms of equity allocation globally. The poll showed that overall, a net 30% of fund managers said they were underweight U.K. stocks, 1.2 standard deviations below the long-term average.On the trade war front, the second day of U.S.-China negotiations kick off on Friday after U.S. President Donald Trump said the first day had gone “very well.” It’s the first senior-level in-person talks since late July to attempt to end an 18-month standoff. Trade-sensitive sectors including autos and miners were surging, with Volkswagen AG up 3.5%, Daimler AG up 2.5%, and ArcelorMittal up 4.8%.Uwe Becker, co-CIO of Shareholder Value Management, remained skeptical about the overall market rally, however. “The reason for this upward move is lacking the facts. We haven’t heard any details on trade talks or Brexit besides the comments that talks are ‘going well,’ hence the move lacks substance to me.”To contact the reporters on this story: Namitha Jagadeesh in London at firstname.lastname@example.org;Jan-Patrick Barnert in Frankfurt at email@example.comTo contact the editors responsible for this story: Blaise Robinson at firstname.lastname@example.org, John ViljoenFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.