Markets hold ground after 'high drama' over new Brexit delay

11 April 2019 - 14:24 By AFP
British Prime Minister Theresa May leaves after holding a news conference following an extraordinary European Union leaders summit to discuss Brexit, in Brussels, Belgium April 11, 2019.
British Prime Minister Theresa May leaves after holding a news conference following an extraordinary European Union leaders summit to discuss Brexit, in Brussels, Belgium April 11, 2019.
Image: REUTERS/Susana Vera

The pound steadied Thursday and stocks held firm after Britain and its EU partners agreed again to extend Brexit.

European leaders agreed at a summit with British Prime Minister Theresa May to delay Brexit for up to six months, saving the continent from a chaotic no-deal departure on Friday.

"The high drama of a Brussels summit between the 28 EU leaders that ran late into the night failed to cause a commensurate move in the markets," noted XTB analyst David Cheetham.

The deal struck in the early hours of Thursday allows Britain until October 31 to ratify the divorce it had initially set for March 29, but leaves the door open for Brexit anytime before then.

News of the delay allowed traders to breathe a sigh of relief but observers noted the reprieve was only brief with the agreement merely kicking the can down the road.

If Britain has not ratified the divorce by May 22, it must hold elections to the European Parliament from May 23 to 26.

If London fails to meet such a EU legal requirement, it will crash out of the bloc on June 1 with no deal.

No surprise 

"A second delay really has not surprised the markets," ETX Capital analyst Michael Baker told AFP.

He added: "We are no closer to exiting the European Union -- or the panic-inducing no deal scenario."

"The difference with this extension is that it contains the EU elections, with the UK obliged to take part.

"If the UK has not agreed a compromise and does not hold elections then they are expected to leave with no agreement in place."

In late Thursday morning deals, sterling wobbled versus the euro and dollar, while London's benchmark FTSE 100 stocks index was up 0.1 percent.

In the eurozone, the Paris CAC index won 0.6 percent and the Frankfurt DAX gained 0.2 percent shortly after midday.

May remains under intense pressure from hardline Brexit supporters in her Conservative party not to compromise in her talks with the opposition Labour party, while the discussions are moving slowly.

Kicking the can?  

Richard Falkenhall, forex strategist at Swedish banking group SEB, expressed doubts over a cross-party agreement.

"The small reactions in the pound and in markets in general are understandable as the outcome of the EU-summit was widely anticipated," Falkenhall told AFP.

"There are no winners on a hard Brexit and the EU is well known for kicking the can whenever this is an option."

He added: Although it is a six-month extension we believe that May will try to reach an agreement with the Labour (party) soon enough to avoid British participation in the elections for the European Parliament, although we doubt she will manage this."

British business on Thursday gave a cautious welcome to the second Brexit extension -- but also urged an end to the "chaos" that has plagued the nation's withdrawal from the EU.

Asian equities mostly fell Thursday, with few catalysts to drive buying and investors still on edge over a brewing trade battle between the United States and Europe.