FTSE licking its wounds after Brexit vote defeat

The FTSE started the day at a slightly lower note following the spectacular defeat in Parliament of the Prime Minister’s Brexit proposal. London has woken up to a new day of uncertainty as Jeremy Corbyn tabled a motion of no confidence in the government which will be decided on today. It is far from given that the vote will manage to shift the government. 

The PM managed to withstand the no-confidence vote from her own party only recently and UK opinion polls indicate that she still leads against the Labour leader despite months of chaotic Brexit dealings. 

The currency markets are increasingly reading this as a positive sign, believing that a hard Brexit is becoming more unlikely than an extension of the Brexit March deadline or even a change on the overall Brexit direction. The pound bounced against the dollar and euro immediately after the vote Tuesday evening and it is still holding its ground, up 0.2% against the common currency and up 0.17% against the greenback. 

US banks lower fourth quarter results 

Bank of America is due to report its fourth quarter earnings later today and looking at numbers produced by its peers Citi, Wells Fargo and JPMorgan earlier this week there is a common theme emerging. All three banks have reported a decline in revenue. 

One area that was hit in particular was mortgage lending, mainly because consumers have fled from big bank mortgages post 2008 and have flocked to specific lending institutions that only focus on house loans.  The trading banks, Citi and JP Morgan, also suffered major losses on their trading books, in fixed income typically more than equities. 

What will work in favour of the banks going forward is the Fed’s plan to slow down interest rate increases this year to help keep consumer spending and house buying up. But the prolonged US government shutdown is beginning to work against big financial institutions because US market regulator the Securities and Exchange Commission has now been closed for the three weeks disrupting normal market operations such as IPOs. 

British consumer spending 

In amidst the UK’s political chaos the country’s economic numbers keep nudging lower as businesses and consumers struggle with Brexit-induced uncertainty. British consumer spending fell in December at the fastest rate in eight months, and although consumers splurged in bars and restaurants this was not enough to offset lower spending on the high street. Online sales gained in favour of shop spending but in total Christmas spending was at its weakest since the financial crisis.