A number of UK-exposed Irish stocks faltered on the back of the EU warning that Britain is heading for a no-deal Brexit.
European Commission president Jean-Claude Juncker said a damaging no-deal Brexit is a very real possibility with London’s ideas for solving the contentious issue of the Irish border still unlikely to unlock a deal just six weeks before Britain is due to leave.
"There is very little time left ... The risk of a no-deal is very real," said Mr Juncker during a debate on Brexit at the European Parliament in Strasbourg.
His comments weighed on sterling - which remained unchanged against the euro, but fell against the dollar. That movement was also driven by weak UK inflation figures, making it unlikely the Bank of England will raise rates today until there is more reassuring signs of global economic strength and a no-deal Brexit being avoided.
Irish stocks were also hit. The banks drove the downturn - AIB down over 2% and Bank of Ireland shedding over 3.5%. Forecourt operator Applegreen was down 2.7% and travel stocks Ryanair and Irish Ferries owner Irish Continental Group were both down over 1%.
Mr Juncker said London must present realistic proposals to replace the Irish backstop arrangement in the Britain-EU divorce agreement. His pessimistic tone was echoed by Finland’s minister for European affairs, Tytti Tuppurainen, who told the European Parliament that a no-deal Brexit “is a quite likely outcome.” Finland holds the EU’s rotating presidency.
Mr Juncker said Mr Johnson had told him on Monday that London still wanted a deal, but would leave with or without one on October 31.
A majority of EU lawmakers later voted for an extension to Britain’s scheduled departure date in a resolution that is not binding but which has political weight.
EU leaders will meet for a make-or-break summit in Brussels on October 17-18, just a fortnight before Brexit is due to materialise.
US investment bank JPMorgan sounded negative about the prospects of Boris Johnson striking a deal.
Britain is not likely to present a complete set of detailed, written proposals of how it would want the text of the existing - but stalled - Brexit deal changed before the end of the month, UK and EU sources said.
“If that is the case, the summit will end with nothing,” an EU diplomat dealing with Brexit in Brussels said. “If there is to be a deal, it must be prepared to a large extent in advance. It is too technical to leave to the leaders at the last minute.”
The news coincided with fresh figures showing Irish consumer spending remained broadly flat in August as shoppers largely hold off to see the full consequences of Brexit.
"Spending trends remained muted in Ireland during August, with a marginal rise in household expenditure cancelling out a similarly-sized fall seen in July," said IHS Markit associate director Andrew Harker.
"Consumers appear to be operating a wait-and-see approach at present, with uncertainty around the final outcome of Brexit still prevalent. The signs are, however, that households are becoming more worried about spending, with consumer confidence at a near five-year low," he said.
- additional reporting Reuters