Sterling rebounded from the day’s lows on Tuesday after British lawmakers defeated Prime Minister Theresa May’s deal on withdrawing from the European Union, and major world stock markets climbed on hopes of more stimulus for China’s economy.
Sterling rallied more than a cent to stand above $1.28 after the vote. It was last trading at $1.2871, up 0.06 per cent on the day.
May’s crushing loss, the first British parliamentary defeat of a treaty since 1864, marks the collapse of her two-year strategy of forging an amicable divorce maintaining close ties to the EU after the March 29 exit.
“After the big defeat, which was even larger than what the market had expected, we might getting closer to a no-Brexit scenario. The pound has retraced some of its losses after that vote which was not unexpected. It may also simply be short-covering,” said Eric Stein, co-director of global income group at Eaton Vance in Boston.
“There is still a massive amount of uncertainty for U.K. assets,” he said.
Canada’s main stock index rose on Tuesday, as a jump in crude prices lifted shares of energy companies.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially up 70.75 points, or 0.47 per cent, at 15,046.28.
The energy sector climbed 1.9 per cent. Husky Energy Inc. was up 3.9 per cent, while Suncor Energy Inc. and Canadian Natural Resources Ltd. both rose 2 per cent and 2.5 per cent, respectively.
U.S. crude oil futures settled up 3.2 per cent at $52.11 a barrel, supported by China’s plan to introduce policies to stabilize a slowing economy.
Conversely, materials stocks finished down 1.2 per cent. Barrick Gold Corp. lost 3.7 per cent, while Norbord Inc. declined 3.4 per cent.
The Canadian dollar edged higher against its broadly stronger U.S. counterpart on Tuesday as oil prices rebounded, while political upheaval in the UK dominated trading in the foreign exchange market.
British lawmakers defeated Prime Minister Theresa May’s Brexit divorce deal by a crushing margin, raising the prospect of a disorderly exit from the European Union or even to a reversal of the 2016 decision to leave.
“This is potentially the most clear and present shock in the FX system right now,” said Bipan Rai, executive director and North America head, FX Strategy at CIBC Capital Markets. “If it’s risk-off, the loonie will get hit.”
Canada exports many commodities, including oil, so its economy could be hurt if political uncertainty reduces prospects for global growth.
The Canadian dollar was trading 0.1 per cent higher at 1.3272 to the greenback, or 75.35 U.S. cents. The currency, which on Monday touched its weakest level in nearly one week at 1.3297, traded in a range of 1.3227 to 1.3293.
The U.S. dollar rose against a basket of major currencies after data showing Germany’s economy slowed in 2018 weighed on the euro.
On Wall Street, stocks rose further after initially paring gains on the Brexit vote.
Helping stock sentiment, U.S. President Trump talked up chances of a China trade deal and Chinese officials hinted at more stimulus for their slowing economy.
Data on Monday showed China’s exports unexpectedly fell the most in two years in December, while imports also contracted sharply.
“Any move to stabilize the global economy by the Chinese should be viewed positively by the U.S. as well,” said Chris Zaccarelli, Chief Investment Officer, Independent Advisor Alliance in Charlotte, North Carolina.
A more-than-6.5 per-cent gain in shares of Netflix after it said it was raising rates for its U.S. subscribers helped boost stocks, while JPMorgan Chase & Co’s shares were up slightly despite reporting a lower-than-expected rise in quarterly profit and revenue, hurt by weakness in bond trading.
The Dow Jones Industrial Average rose 155.75 points, or 0.65 per cent, to 24,065.59, the S&P 500 gained 27.68 points, or 1.07 per cent, to 2,610.29 and the Nasdaq Composite added 117.92 points, or 1.71 per cent, to 7,023.83.
The pan-European STOXX 600 index rose 0.35 per cent and MSCI’s gauge of stocks across the globe gained 0.74 per cent.
Germany reported its weakest growth in five years, causing the euro to decline against the dollar.
The euro was last down 0.56 per cent, at $1.1410, while Europe’s broad FTSEurofirst 300 index added 0.47 per cent, to 1,373.38.
Oil prices rose about 3 per cent on Tuesday, along with world stock markets, supported by China’s plan to introduce policies to stabilize a slowing economy, reversing the previous session’s losses due to grim data in the world’s second-largest economy.
Brent crude rose $1.65, or 2.8 per cent, to settle at $60.64 a barrel. U.S. crude futures ended $1.60, or 3.2 per cent, higher at $52.11 a barrel.
“Some of the fears about the economic slowdown in 2019 seem to have ebbed away,” said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut. “The market is latching on to news that suggests that the economy may be better than thought.”
China’s National Development and Reform Commission offered some support on Tuesday, signaling it might roll out more fiscal stimulus. This countered negative sentiment from Monday when crude prices fell more than 2 percent after data showed weakening imports and exports in China
Reuters