Cabinet Resignations Spark Market Turbulence

High-profile resignations from Theresa May's Government and a challenge to her leadership have rocked FTSE 100 bank and property shares and sterling

Morningstar News Team 15 November, 2018 | 2:54PM Alliance News

UK Prime Minister Theresa May

UK currency and stock markets were volatile on Thursday after a wave of high-profile resignations from the Cabinet, including Brexit Secretary Dominic Raab, and on fears that Prime Minister Theresa will be challenged as leader of the Conservative Party.

The pound slumped from $1.30 to $1.28 and €1.15 to €1.13 after news of Raab's resignation broke on Twitter. Sterling has risen in recent days amid relief that a draft Brexit deal had been agreed between the EU and UK and that Cabinet had approved the withdrawal agreement. This consensus was shattered on Thursday after the Brexit Secretary resigned.

Jordan Hiscott, chief Trader at ayondo markets, said: "It would seem short term traders now see a no deal Brexit as a reality, along with an extended drop in GBPUSD, even from these levels. Predicating how far this could fall is always extremely difficult, but if we break support of $1.2650, the lowest point since 2017, I think we could challenge for $1.20.”

At 2pm, property and banking stocks were nursing heavy losses on the FTSE 100. Shares in Britain's biggest housebuilder, Persimmon (PSN) were down nearly 10%, and Royal Bank of Scotland (RBS) shares were off by 9%. The moves in Brexit-sensitive stocks weighed on the FTSE 100, which was closed to breaking through 7,000 in early afternoon trading.

Will Theresa May Survive?

Leading Brexiteer Jacob Rees-Mogg submitted a letter of no confidence in Theresa May on Thursday, as the UK prime minister reels from the loss of four ministers – including two from her Cabinet – in protest at her Brexit plans.

In a letter to Graham Brady, chairman of the backbench 1922 Committee, Rees-Mogg said May's deal "has turned out to be worse than anticipated and fails to meet the promises given to the nation by the prime minister, either on her own account or on behalf of us all in the Conservative Party manifesto".

His move is expected to be matched by other members of the European Research Group, which he chairs, hugely increasing the chances of May facing a vote of no confidence in her leadership.

A vote will be triggered if 48 Tory MPs write letters to Brady, but it is not known how many he has received so far.

May's deal came under a hail of criticism in the House of Commons, where only a handful of Tories spoke in favour of an agreement thrashed out in 19 months of intensive negotiations.

 

 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Persimmon PLC1,859.50 GBX-1.98-
The Royal Bank of Scotland Group PLC211.43 GBX-0.08

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