NewsWorldUK ministers quit over draft Brexit deal, pound and bank stocks tumble

UK ministers quit over draft Brexit deal, pound and bank stocks tumble

Prime Minister Theresa May battled on Thursday to save a draft divorce deal with the European Union after her Brexit secretary Dominic Raab and other ministers quit in protest and eurosceptic lawmakers stepped up efforts to topple her.

LATEST DEVELOPMENTS – Sterling tumbled 1.5 percent versus the dollar and was headed for its biggest drop this year against the euro. – France led calls among EU states for changes to the draft deal. – A leadership challenge to May could be completed in weeks, eurosceptic lawmaker Jacob Rees-Mogg said. – The BBC reported Conservative lawmakers have not yet submitted enough letters to trigger a confidence vote in her. – A vote can be triggered if 48 Conservative lawmakers (15 percent of the total) write a letter of no confidence to the chairman of the party’s so-called 1922 committee, Graham Brady. – May’s spokesman said she will fight for her premiership if such a vote is called. – Environment secretary and prominent Brexiteer Michael Gove has turned down the chance to replace Raab, the London Evening Standard newspaper reported. – Euro zone banks which issued large amounts of loss-absorbing debt under English law could have more time to meet requirements after Brexit, the bloc’s agency responsible for winding down failing lenders.

FINANCIAL MARKETS British financial regulators held a conference call with major banks seeking feedback on market conditions after the pound and financial stocks sank following Raab’s resignation, sources said. One source said the call was a direct request from Bank of England Governor Mark Carney. The central bank declined to comment.

Britain’s financial services industry greeted the news of the draft agreement with weariness and worry, citing multiple hurdles the government must overcome before they can Brexit-proof their industry. Shares in Royal Bank of Scotland were down 7.3 percent, their biggest one-day fall since the June 2016 referendum. Barclays and Lloyds Banking Group dropped 6 percent each.

CURRENCY MARKET Sterling fell to a session low versus the euro on the report that Rees-Mogg will submit a letter of no confidence in May. The pound sank to 88.52 pence to the euro, down 1.5 percent, and is set for its second biggest drop this year. “We are experiencing huge sell orders and the sterling-dollar pair is in free fall for now”, Think Market analyst Naeem Aslam said.

DEBT MARKET Nerves among British government bond investors forced the debt agency to accept low bids for a 20-year bond at auction to an extent not seen since March 2009. Data from Refinitiv showed the spread between 10-year and 30-year gilt yields had ballooned by more than 11 basis points. STOCK MARKET – Brexit-sensitive British stocks slid. Housebuilders, retailers and banks all fell, dragging the FTSE 250 index down 1.5 percent, while the exporter-heavy FTSE 100 managed to hold flat, supported by a plunge in the value of sterling.

THURSDAY’S RESIGNATIONS Dominic Raab: Brexit minister Esther McVey: Work and Pensions Secretary Shailesh Vara: junior Northern Ireland minister Suella Braverman: junior Brexit minister A parliamentary aide to education ministers also quit.

PRIME MINISTER MAY COMMENTS “We have been preparing for no-deal and we continue to prepare for no-deal because I recognise that we have a further stage of negotiation with the European Council and then that deal when finalised … has to come back to this House,” she told the House of Commons.

“The choice is clear: We can choose to leave with no deal, we can risk no Brexit at all, or we can choose to unite and support the best deal that can be negotiated.”

EU COMMENTS German Chancellor Angela Merkel “We have a document on the table that Britain and the EU 27 have agreed to, so for me there is no question at the moment whether we negotiate further … You have to see the alternatives and then ask: is what we have a basis?” French Prime Minister Edouard Philippe “We need to prepare ourselves for the possibility of a ‘no-deal’ Brexit,” Philippe said. “It will escape no one that the current political situation in Britain could fuel uncertainty… over the ratification of the accord.” German Foreign Minister Heiko Maas Britain and the EU are part of the way towards an orderly Brexit but there is still work to be done on both sides, and discussions will not be easy, Maas said.

BUSINESS COMMENT Airbus welcomed the draft agreement but Chief Executive Tom Enders said: “We look forward to further clarity and the removal of uncertainty as soon as possible so that Airbus, like every business in the UK, can properly plan for the future.”

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