Britain's FTSE Relatively Stable As Brexit Impasse Has Mixed Impact
Published on Oct 16 2018 8:30 AM
Britain's top share index was steady on Monday as a deadlock in Brexit talks depressed domestic stocks but helped internationally focused companies as it weakened the pound.
The FTSE 100 was down 0.1% by 0813 GMT, while the domestically focused midcap index fell 0.7 %, further hit by warnings from ConvaTec and Superdry.
The FTSE outperformed the pan-European STOXX 600 index , which declined 0.4%.
"Thanks to the situation with sterling, the FTSE ended up being one of the better performers," said Connor Campbell, analyst at Spreadex.com.
The stubborn problem of Britain's land border with Ireland thwarted a drive to clinch a Brexit deal before a European Union summit this week, as negotiators admitted defeat after marathon talks and pressed pause for the coming days.
"Any delay or disagreement only heightens the chances of a no-deal Brexit, hence the pound’s red headache," adds Campbell.
Shares in big international firms such as British American Tobacco, Shire and Unilever, as well as oil majors, which tracked rising crude prices, provided the biggest boost to the FTSE.
Shares in precious metal miners Randgold Resources and Fresnillo also rose, up 3.6% and 2.1% respectively, as gold prices hit a near 12-week high.
Among companies with bigger exposure to the domestic economy, banks Lloyds and Royal Bank of Scotland fell 1.2% and 0.7% respectively, while house builders Derwent and Persimmon dropped by around 1 %.
Analysts expect a no-deal scenario to lead to a significant downward revision to Britain's economic growth, with sterling likely to fall further under such a scenario.
Among mid-caps, ConvaTec plunged 27% after the medical devices maker lowered its expectations for revenues and margins, citing a change in inventory policy by its largest customer in its Infusion Devices business.
Fashion group Superdry warned 2018-19 profit could be as much as 17 % below current expectations, blaming a hit to sales from unseasonably hot weather and rising foreign exchange costs. Its shares tumbled 17.7 %.