News of a Brexit extension date of 31st of January has eased tensions in the stock markets, with many leading UK stocks bouncing and bringing an end to the uncertainty, at least for the remainder of 2019.
With the UK ill-prepared to leave the European Union (EU) with or without a deal on 31st October, the EU eventually granted a three-month extension for the UK government to try and break the impasse and get the latest Withdrawal Agreement Bill – negotiated by Prime Minister Boris Johnson – over the line.
The news of the delay until the 31st of January will have disappointed ardent Brexiteers, but it certainly buoyed the markets.
UK-exposed stocks have experienced a rally in recent days since the Brexit extension. The value of shares in Clydesdale & Yorkshire Bank (CYBG), which has recently formally rebranded as Virgin Money UK, has risen substantially from lows of £102 on 8th October to around £138 per share a month later.
Similarly, Royal Bank of Scotland, which is exclusively UK-focused, has also experienced solid growth from £190 per share to around £218 in the last month.
The extension was an ideal opportunity for retail traders to go long on UK stocks in the short term too. Retail traders tend to speculate on financial markets using contracts for difference (CFD) trading platforms, also known as derivatives trading due to the fact that CFD traders never physically own the assets they trade. Nevertheless, CFDs are readily available on shares such as Clydesdale & Yorkshire Bank and Royal Bank of Scotland, replicating the real value of these assets as closely as possible. This allows retail investors to speculate on price movements in either direction in the same way as proprietary traders.
Upon the announcement of the EU’s three-month Brexit extension, attention turned to the forex markets too, where the pound rose by 0.3 per cent against the US dollar, trading at $1.285. Sterling has been somewhat muted since the Brexit extension news, simply because of the (adops insert link behind the words like this decision by Parliament to have a General Election before Christmas. It’s expected that sterling will be heavily influenced during the weeks of campaigning ahead, as to whether or not a majority government can be formed to resolve Brexit in one way or another and move on to the UK’s domestic agenda.
One bank that has remained rooted to the foot of the FTSE 100 in spite of the Brexit extension announcement is HSBC, which experienced an immediate decline of 3.8 per cent in its share price on the publication of a decline in its Q3 2019 profits. HSBC’s chief executive Noel Quinn admitted that its performance in parts of mainland Europe and the US was “not acceptable”.
Meanwhile the FTSE 250, which is a more accurate reflection of British businesses, has also been rocked by some worrying retail figures. Marks & Spencer posted a (adops insert link behind the words like this 2 per cent decline following weaker clothing and homeware sales which resulted in a 17 per cent pre-tax fall in profits. Dixons Carphone also experienced sizeable declines following reprimands from the Competition and Markets Authority for misleading product warranties that have left many consumers angry and bemused.