By Riva Gold
-- British pound under pressure
-- China markets jump
U.S. stocks opened lower Thursday after a slew of resignations
over a proposed Brexit deal rattled the British pound and European
markets.
The Dow Jones Industrial Average fell 117 points, or 0.4%,
shortly after the opening bell. The S&P 500 declined 0.4% and
the Nasdaq Composite fell 0.3%.
The relatively upbeat tone in the U.S. and Asia underscored
investors' emerging view that any spillover from Brexit uncertainty
would likely be contained to the U.K. and its European trading
partners, rather than pose a major risk to the U.S. or global
economy.
Shares of Cisco Systems jumped 4.8% in pre-market trading after
the tech giant reported its fourth consecutive quarter of growth,
helping assuage recent market jitters over the health of the
technology sector.
An upbeat report from Chinese tech giant Tencent Holdings had a
similar effect on Asian markets, with stock markets in Hong Kong
and Shanghai advancing by the most in two weeks.
In Europe, the Stoxx Europe 600 was down 0.5% in afternoon
trading after initially opening higher. The losses came after U.K.
Brexit Secretary Dominic Raab resigned in morning trading, shortly
followed by cabinet minister Esther McVey, signaling turmoil for
Prime Minister Theresa May's plan for the country to exit from the
European Union.
The British pound was last down 1.5% at $1.2799, more than
reversing a small boost late Wednesday when Mrs. May secured
cabinet approval for her Brexit deal.
"It was always going to be tough for Prime Minister Theresa May
to get [her Brexit deal] through Parliament, but this resignation
makes that even more difficult and brings her future into immediate
consideration," said Shamik Dhar, BNY Mellon Investment
Management's global chief economist. "The chance of a no-deal has
gone up a bit," he said.
Stocks tied to the U.K. economy came under pressure: The FTSE
250 index of U.K. stocks fell 1% Thursday while shares of U.K.
lenders Royal Bank of Scotland, Barclays and Lloyds Banking Group
fell around 5-7%. The more multinational FTSE 100, which generates
about 77% of revenues outside the U.K., rose 0.2%, benefiting from
the pound's weakness.
Across Europe, the auto sector fell 1.5%, hit by worries over
trade and data showing new car sales in the European Union
continued their decline in October.
"Today is a precursor" to how the market might react if there's
a no-deal Brexit, said BNY's Mr. Dhar.
"It's mostly U.K. and to some degree euro area assets that are
being affected," he said, noting the impact on the world economy
appears fairly limited.
Stocks around the world had already been volatile this week amid
steep swings in oil prices, concerns around the technology sector
and increasing doubts about the health of the world economy.
Brent crude oil was up 0.8% at $66.62 a barrel Thursday after
falling 6.6% on Tuesday in volatile trading.
"When you have oil go down [so much] in a week, that's going to
create volatility that's far reaching," said Mark Esposito, chief
executive at Esposito Securities.
Downbeat economic readings have also clouded the outlook for the
world economy. Federal Reserve Chairman Jerome Powell said
Wednesday evening that the U.S. central bank was closely monitoring
a modest deceleration in global growth.
"You still see solid growth, but you see growing signs of a bit
of a slowdown. And it is concerning," he said.
Mr. Powell didn't say any of the challenges were strong or
surprising enough to change the Fed's policy path, however.
In Asia, stocks were broadly higher outside Japan amid media
reports that China had made an opening bid to the U.S. on trade, as
well as upbeat results in the technology sector.
Shares of Tencent Holdings rose 5.8% after the Chinese tech
giant reported a better-than-expected 30% rise in profits. Hong
Kong's Hang Seng rose 1.7%, the Shanghai Composite Index rose 1.4%
and South Korea's Kospi rose 1%.
Japan's Nikkei Stock Average was down 0.2% as the yen
strengthened against the dollar. A stronger currency tends to
pressure shares of multinationals that translate earnings from
overseas.
Write to Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
November 15, 2018 09:50 ET (14:50 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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