Pound headed for its biggest one-day loss since June of 2017
London’s big banks fell Thursday, but the FTSE 100 stayed just in the black in a rough day of trading as the pound plunged after resignations in the U.K. government over Prime Minister Theresa May’s Brexit proposal.
Smaller companies, typically more vulnerable to a weakening currency, had an even tougher day as they tracked the falling sterling.
How are markets performing?
The U.K.’s FTSE 100 UKX, +0.48% closed at 7,038.01, largely flat after finishing off 0.3% on Wednesday. However, the FTSE 250 MCX, +0.52% which reflects a broader array of smaller-cap companies that derive a greater portion of their revenues domestically, shed 1.5% to 18,905.36.
The British pound GBPUSD, +0.0548% was last down 1.7% on the day to $1.2618 for its biggest one-day drop since June 2017. That compares with $1.2991 late Wednesday.
What drove stocks?
The resignation of Brexit Secretary Dominic Raab and Pensions Secretary Esther McVey, plus a couple more officials, coming less than 24 hours after May announced cabinet backing of the deal sent ripples of fear through U.K. markets. May was due to hold a press conference after the close of markets to address the crisis.
The move follows a period of volatility for sterling after May said Wednesday that she had secured approval from her cabinet for a plan that would execute the exit British voters approved in a June 2016 referendum. A weaker pound can benefit bigger companies such as those in the FTSE 100, as they obtain a chunk of revenues from overseas.
What stocks were active?
Banks drove the losses in London, amid concerns the Brexit deal could be in trouble. Royal Bank of Scotland Group PLC RBS, -8.91% RBS, +0.09% ended the day down nearly 10%, while Lloyds Banking Group PLC LLOY, -0.31% LYG, -6.29% tumbled 5%.
Building companies were also hit hard on fears Brexit uncertainty could also hit housing demand, with Persimmon PLC PSN, +0.69% and Taylor Wimpey PLC TW., +1.33% tumbling over 7% each.