Market rally slows on Brexit warning

Growth in UK-exposed Irish stocks slowed yesterday and sterling was unmoved against the euro, after two days of rises, amid warnings that the chance of a no-deal Brexit occurring at the end of next month remains significant.

“The economic impact of persistent Brexit uncertainty is already clear. Developments are consistent with our view that UK political volatility would intensify in the run-up to the October 31 Brexit deadline”, said international credit ratings agency Fitch, which sees UK GDP falling by more than 3% over two years after a no-deal drop-out.

The big three European exchanges — London’s Ftse, the Dax in Frankfurt, and the Cac-40 in Paris — inched marginally higher on sustained positivity around US-China trade talks, but US markets opened slowly as investors were less than impressed with under- whelming US jobs numbers.

Dublin was marginally ahead, with Brexit-exposed stocks including Bank of Ireland, Ryanair, Dalata Hotels, C&C, Kingspan, and Ryanair still in growth mode, but also in slowdown.

Meanwhile, the Federal Reserve will continue to act “as appropriate” to sustain the US economic expansion, Fed chair Jerome Powell said in Zurich yesterday, sticking to a phrase markets have taken to signal further rate reductions, but declining to be more specific.

“Our obligation is to use our tools to support the economy, and that’s what we’ll continue to do.” We are clearly at a time where there is a range of views” among Fed policymakers meeting on September 17-18 to decide on rates.

“A no-deal Brexit remains a significant risk due to UK political volatility, despite manoeuvres in [the British] parliament to try to prevent it,” said Fitch.

Global indices had touched one-month highs on Thursday after Beijing and Washington agreed to hold trade talks in early-October, raising hopes an economically damaging trade war could be brought to a halt.

That, and a handful of developments in Italian and UK politics this week, have brought relief to the market.

-Additional reporting Reuters