Sterling rose further yesterday after Brussels gave Britain a Brexit deadline extension, but stocks dived as fresh economic gloom gripped trading floors.
European equities tanked and the euro sank under $1.13 as poor eurozone manufacturing data rekindled fears over the state of the world economy, dealers said.
The pound, however, pushed higher one day after European Union leaders agreed at a crucial summit to delay Brexit following a request from Prime Minister Theresa May.
If the premier fails next week to push her divorce agreement through a fractious Parliament that has already rejected the deal twice, Brexit will take place on April 12, unless London agrees to take part in European elections.
If she manages to get it passed, the exit date will be pushed back until May 22. Prior to the offer, Britain had been due to crash out from the bloc next Friday.
“Sterling remains very volatile as EU leaders have moved to stop a chaotic no-deal Brexit from happening next week by handing Theresa May an extra fortnight,” said Oanda analyst Craig Popplewell.
“The UK must decide by April 12 what it will do next,” he added.
However, the stronger pound weighed on London’s FTSE 100 index, which has a large number of multinationals whose earnings are reported in dollars.
Poor manufacturing data, meanwhile, set alarm bells ringing for investors.
“A series of worse than expected economic releases from Europe have sounded the alarm bell not just for the bloc, but also the global economy, by providing further evidence of a worldwide slowdown in economic activity,” said XTB analysts David Cheetham.
Signs of a weak first quarter for the eurozone mounted yesterday as a closely-watched survey pointed to March output being dragged further down by manufacturing weakness, especially in Germany, Europe’s largest economy.
Data company IHS Markit said in a first estimate for the month that while services firms proved “resilient”, manufacturers in the 19-nation single currency bloc “reported their steepest downturn for six years” as pressure mounted from trade wars and Brexit fears.
At 47.6 points ‒ down from 49.3 last month ‒ the manufacturing purchasing managers’ index (PMI) sank further below the crucial 50-point threshold between expansion and contraction.
A headline “composite” figure that also includes services re-mained in positive territory, although it shed 0.6 points compared with February to land at 51.3.
In late trading, Germany’s blue-chip DAX 30 was down 0.8 per cent, while the CAC 40 in Paris fell 1.3 per cent. London’s FTSE 100 dropped 1.4 per cent with the strong pound adding pressure to stocks.
Yesterday, Wall Street opened lower, with the Dow sliding 0.6 per cent in the first minute of trading.
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