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Thursday, 17 January 2019 00:29 - - {{hitsCtrl.values.hits}}
LONDON (Reuters): World equity markets on Wednesday rode out the heavy parliamentary defeat for British Prime Minister Theresa May’s Brexit deal, as investors saw potential for legislative deadlock to force London to delay its departure from the EU.
May’s government faces a no confidence vote on Wednesday after the shattering rejection left Britain’s exit from the European Union in disarray.
May is expected to survive the vote but investors see little sign of breakthrough on the Brexit impasse.
As a result, they are increasing betting on Britain being forced to postpone its planned March 29 exit, though few have any clarity on what that would mean for the country in the longer run.
Markets had largely priced in the overnight defeat, and in early trade major European bourses mirrored overall resilience in Asian markets.
There, stocks were also lifted by signs that China will take more steps to bolster its slowing economy and the US Federal Reserve may pause its run of interest rate rises.
With some expecting a delay to raise chances of a softer Brexit, for example based on the opposition Labour party’s idea of membership of a permanent customs union, sterling was flat against the dollar at $1.2860.
The MSCI world equity index, which tracks shares in 47 countries, was flat, while MSCI’s main European Index gained 0.3%.
Britain’s leading equity index fell 0.1% in early trade, lagging European stocks which climbed 0.2%.
The broader Euro was up 0.3%, while indexes in Germany, France and Spain all rose.Earlier in the day MSCI’s broadest index of Asia-Pacific shares outside Japan ticked up 0.2%, with South Korea’s Kospi .KS11 and Hong Long’s Hang Seng .HSI both scaling six-week highs.
Asian shares had responded well to China’s central bank injecting a record amount of money into the country’s financial system. That underscored Chinese officials’ commitment to signal more measures to stabilise a slowing economy.
Global markets have drawn succor from the resumption of Sino-US trade talks, though scepticism over the absence of detailed progress was underlined overnight as the US trade representative that he did not see any progress made on structural issues during US talks with China last week.
Investors are also betting that the US Federal Reserve will slow its interest rate hikes.
On Tuesday US policymakers agreed the Federal Reserve should pause further rate hikes until it is clear how much the US economy will be held back by larger risks like slowing growth in China. The dollar fell 0.1% against a basket of six major currencies to 95.921, and lost 0.1% against the yen at 108.58 yen.
The euro was steady against the dollar at 1.1418. The single currency has lost nearly 1.5% from a 12-week high hit on Jan. 10.In sovereign debt markets, British government bonds underperformed versus their German peers in early trade, with March gilt futures FLGcv1 opening 30 ticks lower at 122.90, underperforming German Bund futures FGBLc1 by around 10 ticks. Long-term US Treasury yields dropped to an 11-month low of 2.543% at the start of January but have bounced back above 2.70%.
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