London’s exporter-heavy FTSE 100 fell to session lows on Tuesday as sterling firmed after the United Kingdom‘s Supreme Court ruled that Prime Minister Boris Johnson acted unlawfully when he advised Queen Elizabeth II to suspend parliament just weeks before Brexit.
The ruling, a major setback for Johnson who has promised to deliver Brexit on October 31 with or without a divorce deal with the European Union, led the main index to hand back earlier gains and slide as much as 0.3 percent.
“Fundamentally, it’s hard to see how this gets the UK and the EU any closer to a deal that’s approved by MPs, but it does really deliver a massive blow to Boris Johnson,” Markets.com analyst Neil Wilson said.
Shares of companies that book a major chunk of their earnings in dollars slid, with BAT and Imperial Brands giving up more than one percent each, while the JP Morgan index that follows UK-listed companies making their money abroad also hit session lows.
The more domestically-focused FTSE 250 index cut some losses but was still 0.2 percent lower, with most market participants still unsure as to how the already chaotic Brexit process would now play out.
“I think the downward move in the FTSE 250 is due [to] more political uncertainty, the chatter of a general election is doing the rounds, which has chipped away at equity market sentiment,” said CMC Markets analyst David Madden.
Banks with a larger exposure at home, including Barclays and the Royal Bank of Scotland, moved lower, bringing the earlier rebound in financial stocks to a premature end.
“It’s extremely difficult to say whether the ruling will be a game-changer or nothing more than a headline maker but it will certainly ramp up the Brexit theatrics, just over five weeks ahead of October deadline,” Oanda analysts said.
However, stocks considered most sensitive to any updates on the domestic economy reacted positively to the ruling. Blue-chip housebuilders Persimmon and Berkeley added more than one percent each.
The mid-morning proceedings took the spotlight away from good news overnight that the United States and China will resume trade talks next month.
After its steepest monthly fall this year amid escalating trade tensions and recession fears in August, the blue-chip index has rebounded this month as various central banks have cut interest rates to counteract slowing global growth.
Among a few notable news-driven movers was mid-cap AG Barr, which jumped six percent after the soft drinks maker stuck to its annual forecast despite a “disappointing” first half.
Among smaller stocks, Metro Bank sank almost 17 percent to a new life-low, as the troubled lender ditched a 250 million pound ($311.5m) bond issue on Monday after failing to attract investors.
“It shows the kind of mire Metro is in after the accounting error and now expanding FCA investigation … this is a worrying sign that the bank is not able to raise fresh debt and/or capital when the going gets tough,” Wilson said.
AIM-listed advertising agency M&C Saatchi slid 12 percent to its lowest in more than seven years after warning annual profit would fall five to 10 percent below estimates.