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No-deal Brexit rejection lifts pound, stocks

The FTSE is on the rise this morning, feeling relief after Parliament rejected the option of a no-deal Brexit but the London gauge and other European indices were also helped by a strong close on Wall Street where the S&P finished the day on a four-month high.

Sterling bounces

Sterling is the biggest beneficiary of the latest installment of the Brexit drama. Though the Prime Minister tabled a motion to extend the possibility of a no-deal Brexit until a later point her own MPs broke ranks to vote for an alternative motion that completely excludes the possibility of a no-deal. Although the voting is not done – MPs have to go back to the ballot boxes late Thursday to decide how much more time Britain should have to be able to come up with an alternative deal – the pound is already in a much stronger position against both the dollar and the euro. The currency spiked to $1.3341 and EUR1.1784 overnight and although the pound has given up some ground this morning it is still at the highest level in weeks.

Further slowdown in China

While Brexit is playing out at home other clouds are gathering over the Chinese economy which will eventually start affecting trade in Britain and in Europe. Over the last few months Chinese economic indicators have been turning more and more negative, showing a shrinking in manufacturing, a slowdown in exports and a gradual erosion of GDP growth getting closer to 6%. 

Although traditionally there is a decline in the country’s production and exports in the first quarter, this year the decline is more pronounced than usual. Latest data shows that China’s industrial output has sunk to the lowest point in 17 years and that the number of jobless is on the rise. For the time being the country’s spending still continues, though at a slower pace, with property investment and retail spending holding level. The domino effect is already being felt in Europe, particularly in Germany because of its large exports of cars, industrial machinery and equipment.

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