By Dan Atkinson
London stocks were lower today as Brexit threatened to spark a full-blown constitutional crisis, however sterling was higher against other major currencies.
The blue-chip FTSE 100 index lost 1.22% to 6,937.11, while the FTSE 250, which is more focused on the domestic economy than the international FTSE 100, dropped 0.4% to 18,255.66.
Yesterday, the Government suffered three major defeats in the House of Commons regarding its Brexit stance and was found in contempt of Parliament for failing to publish the legal advice it has received about its proposed Brexit deal.
Shares down across the continent
That advice was to be published today.
MPs have given themselves the right effectively to take over the Brexit negotiations should the deal negotiated by Theresa May, the Prime Minister, be rejected when it is put to the vote on 11 December.
The fact the pound is stronger and the FTSE 250 has fallen by less than the FTSE 100 may suggest markets are less concerned by the Government’s Brexit woes than perhaps might have been expected. But cause and effect are difficult to untangle, given that continental markets also lost ground.
In Frankfurt, the DAX was 1.09% lower at 11,211.66, while in Paris the Cac 40 index lost 1.14% to 4,955.27.
Gold, usually a safe haven in times of trouble, was 0.67% higher at 1,239.25 an ounce. Bullion investment firm The Pure Gold Company attributed Brexit-related anxiety to a 398% increase in customers buying physical gold since the Government’s Parliamentary defeats yesterday.
Opposition to Mrs May’s deal agreed with the institutions of the European Union and the other 27 EU member countries, comes from two directions. One group of MPs wants a much “cleaner” break with the EU, while Mrs May’s agreement would maintain significant ties in terms of trade in goods and the future of the border between the Republic of Ireland and Northern Ireland.
Another group has hoped of either thwarting Brexit, by demanding and then winning a second referendum, or achieving a “soft” break with the EU.
In the hall of mirrors that is the Brexit debate, it is possible that yesterday’s defeats will have strengthened Mrs May’s hand, because they appear to have moved events in favour of this second group. Brexit-supporting MPs may prefer to back the Government’s deal as preferable either to a so-called “Brexit in name only” soft break with the EU or a second referendum.
A constitutional crisis would take the markets into uncharted waters. For example, it is far from clear whether the Bank of England would react to such a debacle by raising interest rates, to prevent sterling going into free-fall, or by cutting them, in order to stave off a recession.