17.15 (close): The pound embarked on a remarkable rally after a lightning bolt ruling from the High Court cast doubt over Brexit.
Sterling surged to a three-and-a-half week high against the US dollar, as three senior judges ruled that Prime Minister Theresa May cannot trigger Article 50 of the Lisbon Treaty without facing a parliamentary vote.
The rebound from the pound dealt a blow to the FTSE 100 Index, which slumped back from morning gains to close down 54.91 points at 6,790.51.
Gina Miller: The businesswoman headed up a High Court Brexit challenge
However, some stocks were enjoying uplift from sterling’s rise, with easyJet and British Airways-owner IAG climbing 29.5p to 997.5p and 9.4p to 450.8p respectively.
Airlines have seen their earnings come under pressure from the Brexit-hit pound, with IAG reporting last week that the slump in sterling had dealt a 162million euro (£145million) blow to operating profit in the three months to the end of September.
Jasper Lawler, market analyst at CMC Markets, said the markets were reacting with caution to the fresh bout of uncertainty served up by the High Court.
‘Investors are not panicking but have been paralysed into inaction over the endless possible outcomes of the US election and Brexit.’
‘The Government will appeal the (High Court’s) decision so it’s not game over yet,’ he added.
‘Were the Government to be overruled in its appeal, there is a real prospect that Brexit can be overturned.
‘Still, assuming the majority of MPs would be willing to vote against their constituency might be overly generous.’
Across Europe, Germany’s Dax was down 0.4 per cent, while the Cac 40 in France was flat.
The price of oil was 0.9 per cent lower at 46.45 US dollars a barrel as Opec’s plans to curb production became cloaked in scepticism ahead of the organisation’s meeting in Vienna on November 30.
On the currency markets, the pound surged to 1.249 versus the dollar, before paring gains to trade up 1.2 per cent at 1.245.
Sterling also climbed 1.2 per cent against the euro to 1.122, despite the Government’s immediate announcement that it would appeal against the High Court’s decision at the Supreme Court.
The landmark High Court ruling was part of a triple tonic for sterling, which was buoyed by better-than-expected data from the services sector and the Bank of England’s decision to keep interest rates on hold at 0.25 per cent.
In UK stocks, supermarket chain Morrisons was pushed higher after it totted up a full year of sales growth, with its ‘biggest ever’ Halloween helping cement its turnaround.
The grocery giant said like-for-like sales in the third quarter rose 1.6 per cent, with Halloween turnover up around 20 per cent. Shares rose 2.1p to 223.4p.
Away from the top tier, Tate & Lyle was among the biggest risers on the FTSE 250 after the food ingredients maker enjoyed a sterling sweetener after the Brexit-hit pound boosted profits by £15million.
Shares were up more than three per cent, or 28.5p to 807p, after the firm said pre-tax profits leapt 83 per cent to £128million in the six months to the end of September, while sales rose 13 per cent to £1.321billion over the period.
The biggest risers on the FTSE 100 Index were Royal Bank of Scotland up 11.2p to 193.9p, Dixons Carphone up 15.1p to 341.5p, British Land Company up 22p to 607p, Marks & Spencer up 10.9p to 351.2p.
The biggest fallers on the FTSE 100 Index were Randgold Resources down 475p to 7,110p, Fresnillo down 77p to 1,703p, Glaxosmithkline down 52.5p to 1,554p, Johnson Matthey down 104p to 3,265p.
15.20: The Footsie was still languishing in the red by late afternoon after a session that has so far witnessed fresh economic growth and inflation forecasts and a major High Court ruling.
The FTSE 100 index was off 34 points at 6,811.2, with little impetus to push higher despite a strong start on Wall Street.
In the US, the Dow Jones rose 23.22 points to 17,982.8, the S&P 500 gained 2.36 points to 2,100.3 and the Nasdaq composite added 7.29 points to 5,112.8.
Rise: The pound rose 1.4 per cent to $1.2473 against the dollar after the High Court ruled that MPs should vote on Brexit and the Bank of England said it no longer expects to cut interest rates again this year
But the focal point of the day has been the High Court court backing of a challenge by businesswoman and former model Gina Miller – who argued Prime Minister Theresa May did not have the power to trigger Article 50 without authorisation from MPs and peers.
The surprise decision sent the pound soaring and dominated discussions acrosS London’s trading floors.
Consensus suggests that if the decision is upheld then it could lead to a ‘Soft’ rather than ‘Hard’ Brexit.
While some have argued that the Prime Minister’s plan to trigger Article 50 by the end of March could be derailed altogether.
Neil Wilson, a markets analyst at ETX Capital, said: ‘The High Court ruling on Article 50 is a body blow for Theresa May and the Brexit-leaning ministers at the heart of government. It’s made triggering Brexit a lot trickier and has given sterling a massive shot in the arm.
‘The stage is now set for a fresh battle over Brexit and there is the prospect that parliament will block Britain’s withdrawal from the EU, albeit a dim and distant one for now. We need to get more clarity on what MPs think and intend to do about this now they have a say.
‘In a year of political surprises, who would bet against another one? A massive grass-roots remain campaign could tilt the balance.’
But perhaps the most sober judgement came from Bank of England governor Mark Carney who said: ‘It is an example of the uncertainty that will characterise this process.’
13.30: The Footsie has hardly moved since this morning despite investors being bombarded with fresh UK growth projections and a High Court ruling demanding MPs vote on Brexit.
By lunch, the FTSE 100 index was down 38.4.5 points at 6,806.9 – led lower by miners and drug companies such as Anglo American and GlaxoSmithKline.
But the real action was taking place on the currency markets, where the pound has gained 1.4 per cent to $1.25 against the dollar and 1.6 per cent against euro to €1.64.
The trigger was the decision by the High Court, which ruled that Prime Minister Theresa May cannot trigger Brexit without permission from parliament.
The ruling was a massive legal ‘slap in the face’ for the Brexit camp and the stage is now set for a dramatic showdown in the Supreme Court next month – with the course of the country potentially at stake.
This was then followed at midday by the release of the Bank of England’s interest rate decision – predictably left unchanged – and its inflation and growth report.
Despite a gloomy forecast for inflation, the Bank of England has said it expects the UK economy to grow by 2.2 per cent this year up, up from 2 per cent.
It has also revised its 2017 figures to 1.4 per cent – up from 0.8 per cent – although it cut its outlook for 2018 to 1.5 per cent from 1.8 per cent.
Neil Wilson, analyst at ETX Capital, explained: ‘The perception now is that after the High Court ruling the UK will move slightly away from a hard Brexit towards a slightly softer version if MPs can dictate terms – it’s all about single market or no single market.
‘This session is about market repricing risks – so marginally less chance (risk) of Brexit and that’s what we see in sterling – marginal shift in the pound really.
‘We’ve also got a fairly hawkish Bank of England saying it doesn’t expect to cut rates again this year and upgrading inflation and growth – which is also supporting sterling.’
Following the upgrades to growth, the mid-cap FTSE 250 index, which is more exposed to the UK economy, jumped 315 points or 1.8 per cent to 17,778.
Satellite operator Inmarsat was the biggest gainer, accelerating nearly 10 per cent, or 69p to 801p, after third quarter results showed demand from airlines for its onboard wifi service.
10.40: The Footsie dropped back as the morning session progressed unnerved by a surprise UK High Court defeat for the government on Brexit moves, with the pound propelled higher by the news and after more upbeat UK PMI data.
Around mid morning, the FTSE 100 index was down 30.2 points, or 0.5 per cent at 6,815,2, just off the session low of 6,814.50, and well below the peak of 6,873.21.
The UK blue chip index retreated after the High Court in London ruled that the British government requires parliamentary approval to trigger the Article 50 process of exiting the European Union, confounding expectations that it would be waved through as it was last week by the Northern Ireland High Court.
Reversal: The Footsie dropped back as the morning session progressed unnerved by a surprise UK High Court defeat for the government on Brexit moves
The UK court did grant the government permission to appeal against the ruling and a government lawyer said the Supreme Court had set aside December 5-8 to hear the matter.
Jasper Lawler, Market Analyst, CMC Markets, said: ‘The government will appeal the decision so it’s not game-over yet. But it’s another reason to be near-term positive on Sterling, which will weigh on prospects for the UK’s international-leaning stock market.’
He added: ‘Were the government to be overruled in its appeal, there is a real prospect that Brexit can be overturned. Losing the legal challenge leaves Britain with the prospect of its own government voting against the will of the people. This will not sit well with the majority of the British public who voted for Britain to leave the EU.
‘The only result of this decision being confirmed can be a general election whereby the British public can be given another opportunity to exercise their democratic rights.’
European markets stayed modestly higher despite the Article 50 news, with France’s CAC 40 index gaining 0.4 per cent, and Germany’s Dax 30 index adding 0.1 per cent after data showed eurozone unemployment hit its lowest level since 2011 in September.
On currency markets, the pound got a fresh boost from the High Court Brexit decision, having been already been pushing higher thanks to some better than expected UK data, which saw output in Britain’s powerhouse services sector pushed ahead last month despite costs rising at their fastest pace for more than five years.
The closely watched Markit/CIPS services purchasing managers’ index hit 54.5 in October, up from 52.6 in September and above economists’ expectations of 52.5. A reading above 50 indicates growth.
Jake Trask, currency analyst at UKForex, said: ‘All PMIs this October have scored well above 50, which signals expansion in Britain’s all-important service sector.
‘Today’s result is the highest reading of the three. In different circumstances, markets would be reasonably upbeat about the state of the UK economy.
‘However, given the untold obstacles faced by the country as we head towards the triggering of Article 50, the feeling is that the good news is unlikely to last. ‘
Sterling extended its gains versus a weaker dollar to 0.6 per at $1.2382, with the US currency weighed by uncertainty due to the tightening of polls for next week’s US Presidential election and enhanced expectations for a December rate hike by the Federal Reserve following yesterday’s policy meeting.
Against the euro, the pound also jumped 0.6 per cent higher to €1.1158 shaking aside any caution ahead of today’s BoE rate decision and latest inflation report.
Among equities, falls by heavyweight miners weighed on the FTSE 100 index, with precious metal groups the worst off as the price of gold retreated on some profit-taking after a recent safe haven boost.
Randgold Resources was the top FTSE 100 faller, dropping 5.3 per cent, or 405p at 7,180p even though it reported a 7 per cent increase in third quarter gold production due to strong performances at its Tongon and Kibali mines in west Africa.
Meanwhile, miner and commodities trader Glencore also fell, down 1.9 per cent, or 4.6p to 242.4p as it said production in most of its commodities declined in the third quarter.
However, strength in energy stocks provided some underlying support for the FTSE 100 index as oil prices bounced back after hefty falls yesterday caused by a big jump in US energy stockpiles.
With Brent crude adding 0.8 per cent at $47.23 a barrel in morning trading, Royal Dutch Shell gained 4.0p at 2,140.5p, but came off earlier highs, while mid cap explorer Tullow Oil jumped 4 per cent, or 10.4p higher to 261.4p.
Also on the upside with blue chips, Morrison Supermarkets gained 2.6 per cent, or 5.7p at 227.0p after today reporting its fourth consecutive quarter of growth, helped by its biggest-ever Halloween performance.
And fund manager Schroders rose 1.2 per cent, or 33p to 2,819p as it said its third quarter assets under management increased by 9.1 per cent.
But Howden Joinery shed 6 per cent, or 22.7p at 359.2p as the builders merchants’ second half sales growth of 4.1 per cent missed estimates, and was a big slowdown from 9.1 per cent growth in the first half.
On the second line, satellite services provider Inmarsat was the top FTSE 250 gainer, leaping 9.3 per cent, or 67.5p higher to 797.5p after reporting a jump in third quarter revenues following strong performances in the government and aviation divisions.
Well-received updates also boosted ingredients group Tate & Lyle, up 6.4 per cent or 49.5p to 828.0p, and property and casualty insurer Lancashire, ahead 5.7 per cent or 40.5p at 749.5p.
But motor insurer esure was the biggest FTSE 250 faller, shedding nearly a quarter of its value, down 65.7p to 200.1p as it completed the spin-off of its price comparison website, Gocompare, shares in which were trading at 76p each on its first session.
08.30: The Footsie gained in opening deals helped by a recovery in energy stocks as oil prices rallied, but the mood remained cautious on US election uncertainties and ahead of the latest Bank of England policy decision and inflation report today.
In opening deals, the FTSE 100 index was up 10.7 points, or 0.2 per cent at 6,856.2, having dropped over 1.0 per cent, or 71.7 points lower yesterday as investors backed away from riskier trades ahead of next week’s too close to call US Presidential election.
US stocks dropped overnight, with the broad S&P 500 index suffering its longest losing streak in five years, while Asian shares also retreated again today as investors sailed to safer havens failing to be lifted by news the Caixin China services purchasing managers’ index rose to a four-month high in October.
Weak: US stocks dropped overnight, with the broad S&P 500 index suffering its longest losing streak in five years as the mood remained cautious on US election uncertainties
Narrowing polls for the US election has already led markets to price in more risk that Republican candidate Donald Trump might defeat his Democratic rival Hillary Clinton, perhaps remembering the turmoil that followed the UK’s surprise Brexit vote in June.
Meanwhile, as expected, the Federal Reserve kept US interest rates unchanged yesterday in its last policy decision before the US election, but signalled it could hike in December as the economy gathers momentum and inflation picks up.
Kathleen Brooks, Research Director at City Index, said: ‘The Federal Reserve left policy unchanged when it announced its decision on Wednesday. While it said that the case for tightening rates had strengthened, it would wait for further evidence before actually pulling the trigger and hiking rates.
‘The Fed only needs ‘some’ further evidence before it hikes rates, which suggests that the bar to raising rates next month has been lowered.
‘However, the elephant in the room at the Federal Reserve was the US election next Tuesday. Even though two members of the FOMC did vote to raise rates, it would be a brave central bank that would hike interest rates during such a contentious election cycle.
‘If Trump wins the election next week, then the market turmoil that could be expected from his win is likely to delay the FOMC’s decision to raise rates in December, regardless of what this Friday’s NFP (non-farm payrolls) report tells us about the state of the US jobs market.’
She added: ‘It’s Super Thursday for the Bank of England today, when it will announce interest rates and its latest Inflation Report.
‘The backdrop to this meeting is a tricky one for the BOE. Not only has the Governor come under attack from the pro-Brexit bunch at Westminster, but also UK growth has surpassed its expectations, and its gloomy forecasts about the UK economy post the referendum have not come to bear.
‘Although we expect the BOE to raise its growth forecast for this year and next, any potential uptick in UK asset prices that are linked to growth, like stocks and the pound, could be limited as the Bank reiterates the long-term impact of Brexit on the economy, including risks to trade and business investment that could permanently dent GDP going forward.’
Ahead of the midday BoE news, markets will also have the latest purchasing managers’ index for the UK’s dominant services sector to digest, which is expected to confirm that the fourth quarter has got off to a decent start with a modest decline from the September number to 52.5 from 52.6.
On currency markets, sterling continue to recapture some ground against a weaker dollar, up 0.3 per cent at $1.2344, with the US currency weak as the US election uncertainty offset enhanced expectations for a December rate hike by the Fed.
Against the euro, the pound remained fairly subdued, just ticking up 0.1 per cent to €1.1098 ahead of the BoE rate decision and with a key High Court decision due today in London on the legality of June’s Brexit vote.
Among commodities, after hefty falls yesterday’s following a big jump in US energy stockpiles, oil prices recovered slightly today, with Brent crude adding 0.8 per cent at $47.21 a barrel in early London trading.
Stocks in focus in London include:
MORRISONS – Britain’s No. 4 supermarket group reported a fourth consecutive quarter of underlying sales growth, cementing a recovery under a new management team.
RSA – The insurer posted a 5 per cent drop in net written premiums in the first nine months of 2016 due to the impact of asset disposals.
SCHRODERS – Britain’s biggest independently-listed fund manager said its assets under management rose by 9.1 per cent in the three months to end-September, boosted by net inflows and market gains.
COCA-COLA HBC – The soft drinks bottler reported lower quarterly sales volumes as poor weather in parts of Europe made for a tough comparison with a strong performance a year ago.
TATE & LYLE – The ingredients supplier raised its full year profit expectations after a better-than-expected first half, helped by strong demand for soft drinks in the United States and a weak pound.
RANDGOLD RESOURCES – The precious metals miner said it was on track to raise dividends and to support three new projects should gold prices stay near current levels.
GLENCORE – The miners and commodities trader said its full year guidance for earnings from its trading operations before interest and tax was now between $2.5billion and $2.7billion, compared with $2.4billion to $2.7billion previously announced.
INMARSAT – The satellites company reported a 5.8 per cent rise in third quarter revenue helped by increasing demand from airlines for onboard wifi and services to governments.
LANCASHIRE – The property and casualty insurer announced a special payout of about $150million as ‘disciplined underwriting and prudent risk selection’ helped it report a 30 per cent jump in quarterly pretax profit despite challenging market conditions.
SHAWBROOK – The challenger lender reported a 19 per cent jump in net loans and advances to customers in the first nine months and said it had seen a minimal impact on its business from economic uncertainties brought on by Britain’s vote to leave the European Union.
UK company news scheduled today includes:
Trading updates: WM Morrison, RSA Insurance (Q3), Schroders, Smith & Nephew (Q3), Glencore, Randgold Resources, Howden Joinery, Coca-Cola HBC, Croda International, Regus, Lancashire Holdings (Q3), Spirent Communications, Inmarsat, JRP Group, Shawbrook, Travelport Worldwide, Belmond
Interims: Tate & Lyle
Finals: Matchtech Group
Ex-dividend factors will knock 3.67 points off the FTSE 100 index (GlaxoSmithKline)
Economic news scheduled today includes:
Bank of England interest rate decision, MPC minutes, quarterly inflation report at 12pm
UK Markit services PMI at 9.30am
eurozone unemployment at 10am
US Challenger jobs cuts at 11.30am
US weekly jobless at 12.30pm
US Markit services PMI at 1.45pm
US ISM non-manufacturing index at 2pm
US factory orders at 2pm
US crude oil inventories at 2.30pm