U.K. Assets Fall Over Deadlocked Brexit Talks, New Lockdowns -- 2nd Update
December 21 2020 - 6:51PM
Dow Jones News
By Caitlin Ostroff
The British pound weakened against the dollar and U.K. stocks
fell as the continuing failure to arrive at a post-Brexit trade
agreement and new measures in the U.K. to curtail the spread of
Covid-19 weighed on British assets.
Sterling fell as much as 2.3% against the dollar in trading
before recovering some of its losses, ending the day 0.5% weaker.
It fell 0.4% against the euro.
Over the weekend, the government imposed a fresh lockdown across
London and the surrounding areas of England in the days leading up
to Christmas, a period of traditionally higher consumer spending.
The curbs are expected to further hamper the economic recovery.
Scientists said early analysis showed a new strain of Covid-19
found in England can spread 70% faster than earlier versions of the
virus. In response, countries across Europe and beyond have barred
travelers from Britain in an effort to keep out the new
variant.
The U.K. is also now less than two weeks away from the end of
the Brexit transition period, after which it won't remain in
European Union trade agreements. Negotiations over a free-trade
deal that would reduce some of the expected disruptions remain in
deadlock.
Investors had hoped a compromise would be found Sunday. The lack
of an agreement would see the U.K. fall back on bare-bones World
Trade Organization rules in its trade with the EU, with tariffs
from January on some trade between Britain and Europe.
"It does appear to be the perfect storm. We have the
disappointment over Brexit -- people expected news of a deal would
come Sunday and that didn't happen -- and then on top of that we
have the news of the sudden policy turnaround for London and the
southeast. That's going to have economic ramifications," said Jane
Foley, head of foreign-exchange strategy at Rabobank.
British assets fell broadly, with the U.K.'s FTSE 100 Index down
2.2%. The FTSE 250, the gauge for small and midsize companies,
declined 2.4%. Investors sought safer U.K. government bonds,
sending the yield on the 10-year note to 0.204% from 0.242% Friday,
according to Tradeweb. Yields fall when prices rise.
The new variant of Covid-19 and the U.K.'s new lockdown measures
also weighed on global stocks. "It makes the near-term growth
dynamic even worse than we were expecting," said Salman Ahmed,
global head of macro at Fidelity International. "Other countries
may follow suit with other restrictions as well if they find this
strain."
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com
(END) Dow Jones Newswires
December 21, 2020 18:36 ET (23:36 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
FTSE 100
Index Chart
From Aug 2024 to Sep 2024
FTSE 100
Index Chart
From Sep 2023 to Sep 2024