The FTSE 100 fell one per cent in early trading today as markets stumbled over Boris Johnson’s “take it or leave it” Brexit ultimatum and weak US economic data.
London’s blue-chip index dropped to 7,287.8 points shortly after open today, following global stocks plunging into a sea of red overnight.
France’s Cac slipped 0.46 per cent to 5,572 points, while Germany’s Dax sank 0.58 per cent to 12,193 points.
Analysts warned European markets “were pummelled” as they caught the tail-end of traders’ escaping risky shares in light of weaker than expected US manufacturing data.
Meanwhile Johnson is set to tell the EU that instead of the so-called Irish backstop, the UK is prepared to offer a “two borders for four years” Brexit plan.
It would see Northern Ireland in a special relationship with Europe until 2025, according to the Telegraph.
“Boris Johnson is set to deliver a take-it or leave-it offer to the EU today. The final tabled offer will fall short of what the EU requires. It will be rejected,” Markets.com chief market analyst Neil Wilson said.
“What the market needs to know now is: does Boris circumvent the Benn bill, and how?”
The Benn Act is designed to stop Johnson from pulling the UK out of the EU in a no-deal Brexit. Instead it will force the Prime Minister to seek a Brexit delay until 31 January if no deal is in place by 19 October.
City A.M. has exclusively revealed the government is relying on the supremacy of EU law to secure a Halloween Brexit, however.
Reports of Johnson’s ultimatum also sent sterling down against the dollar as it sank below $1.23 to 1.2269 in early trading.
“Reports that Boris Johnson has struck a deal with the DUP failed to lift sterling’s spirits on Wednesday, mainly because the ‘two borders’ plan is unlikely to how much sway with Dublin or the EU,” Spreadex financial analyst Connor Campbell said.
Overnight markets saw the Nasdaq drop 1.1 per cent to 7,908.68 points while the S&P 500 fell even heavier, down 1.2 per cent to 2,940.25 points.
“The S&P 500 was going well … but sold off heavily as the market saw this data as a recession figure,” Wilson warned.
“Does this sap the bulls’ conviction? I think not quite yet with the Fed ready to act.”
US President Donald Trump has urged the Federal Reserve to slash interest rates further to prop up the US economy.
Asian markets also suffered, taking their cue from Wall Street and turmoil in Hong Kong to see the Nikkei 225 down half a per cent to 21,778 points. However, the Hang Seng only slipped 0.06 per cent.
Worst could be yet to come today, with Hong Kong retail sales data from August expected to be poor.
Meanwhile the FTSE 100 also saw three titans leave their companies in very different circumstances – chairman Vernon Hill is leaving Metro Bank, Martin Gilbert departing Standard Life Aberdeen, and Tesco CEO Dave Lewis stepping down.