Stocks slip, sterling steadies as #Brexit becomes real

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Published Mar 29, 2017

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London - European shares drifted lower

on Wednesday, while sterling battled back from a one-week low

and regained its composure amid the drama of Britain formally

triggering its exit process from the European Union.

The pound was the biggest loser on major currency markets as

European trading got underway. But it clawed back almost all its

losses after a draft EU document made no mention of the

possibility that the two sides will fail to strike a deal.

"What is priced in at the moment is a hard Brexit, so if

there is something being constructed by the EU that is a little

softer, that would send sterling sharply higher," said Mizuho's

head of hedge fund FX sales, Neil Jones.

Prime Minister Theresa May will notify EU Council President

Donald Tusk in a letter that Britain really is quitting the bloc

it joined in 1973, pitching the United Kingdom into the unknown

and triggering years of uncertain negotiations.

The start of the formal Brexit process comes a day after the

Scottish Parliament backed a bid to hold a second independence

referendum that could break up the UK, adding another layer of

uncertainty for investors to navigate.

The longer term picture may be a more volatile one.

"Sterling will be incredibly sensitive to negotiations and

will offer a clear gauge of how things are panning out. We could

see it move lower still if negotiations take a sour turn - $1.10

is feasible," said Neil Wilson, senior markets analyst at ETX

Capital.

Sterling hit a one-week low of $1.2378 earlier, but

was last trading down 0.1 percent against the dollar at $1.2432.

Elsewhere in currencies, the euro was down a fifth of one

percent at $1.0793 and the dollar was down slightly

against the yen at 111 yen.

The dollar bounced from 4-month lows as a top Federal

Reserve official talked of more rate hikes to come. Fed Vice

Chairman Stanley Fischer, one of the more influential

policymakers with markets, said two more rate increases this

year seemed "about right".

Wall Street recovery

In stocks the leading index of 300 European shares gave up

all its early gains to trade down 0.1 percent at 1,486

points, while Germany's DAX halved its gains to trade up 0.3

percent.

Britain's FTSE 100 fell 0.2 percent as sterling

bounced back from its one-week low.

MSCI's broadest index of Asia-Pacific shares outside Japan

rose 0.3 percent and back toward recent 21-month

peaks, while Japan's Nikkei added 0.1 percent.

The Dow Jones snapped an eight-day losing streak on Tuesday,

its longest run of losses since 2011, in part as a survey showed

consumer confidence surged to a more than 16-year high.

S&P 500 futures pointed to a flat open on Wall

Street.

"Economic fundamentals still remain exceedingly sound here

in 2017 and you do not need Trump's pro-growth fiscal agenda for

this to be one of the best years for growth since the recovery

started," argued Tom Porcelli, chief U.S. economist at RBC

Capital Markets.

"We still think tax reform happens, but you are better off

thinking about the timing as an end of year event at best."

In commodity markets, oil prices gained after a severe

disruption to Libyan oil supplies and as officials suggested the

Organization of the Petroleum Exporting Countries and other

producers could extend output cuts to the end of the year.

US crude CLc1 added 0.4 percent to $48.57 a barrel, while

Brent rose 0.5 percent to $51.57.

Spot gold was little changed at $1 251 an ounce.

REUTERS

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