Companies prepare for disorderly Brexit as talks stall

Big companies are stepping up their plans in case Britain crashes out of the European Union without a deal as Prime Minister Theresa May struggles to get talks back on track after a major setback.

Britain is aiming to agree with the EU on Dec. 14 to move the Brexit talks on to the second phase. This would focus on trade and a two-year transition deal to smooth the departure after March 2019. But the timetable has been thrown into doubt after discussions broke down in Brussels on Monday. 

Senior executives in the financial services sector, which accounts for about 12 percent of the economy, told Reuters May’s efforts to secure a transition deal had come too late and they had no choice but to start restructuring. 

Big supermarkets such as Tesco (TSCO.L) and Sainsbury’s (SBRY.L) have been working with suppliers to identify potential delays, shortages or price rises. They have lined up alternative providers, according to suppliers and sources in the industry.

EURO ABOVE $1.20

Though the risk-averse mood prevailed across financial markets, the euro appeared immune to the geopolitical news.

The single currency surged above 1.20 to the dollar EUR=EBS, breaching a key level as investors grew bullish about its outlook after European Central Bank President Mario Draghi refrained from talking about the currency’s recent strength and in the backdrop of brewing U.S. fiscal problems.

In commodities, crude prices dipped as the market grappled with the shutdown of some 13 percent of refining capacity in the U.S. after a hurricane ripped through the heart of the country’s oil industry.

International Brent crude futures LCOc1 fell 0.7 percent at $51.53 per barrel.

U.S. gasoline price RBc1, which surged as much as 7 percent to a two-year peak of $1.7799 a gallon on Monday, traded at $1.7003 on Tuesday. 

In metals, the drop in the dollar combined with falling inventories in London and Shanghai to push copper to its highest in nearly three years, while nickel also rose sharply. 

A weaker greenback generally makes dollar-priced metals cheaper for non-U.S. investors, boosting demand. 

Benchmark copper CMCU3 rose 2.3 percent to $6,819 per tonne. Three-month nickel on the London Metal Exchange CMNI3 was up 2.7 percent at $11,795. 

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Cautious Fed sends stocks to record highs, dollar dips

Global stocks scaled record highs on Friday, capping their best week in over two months as the dollar stayed close to nine-month lows, with bets on a gradual U.S. Federal Reserve rate hike path and hopes for a strong earnings season boosting risk appetite.

After a scare at the end of last month, when stock markets skidded on the view that the era of easy money might be coming to an end across the globe, investors have been soothed by a run of more dovish comments from central bankers. 

Dallas Fed President Robert Kaplan on Thursday advocated a go-slow approach to further tightening after two hikes so far this year, saying he first wants to see more evidence that inflation is heading back up to the Fed's 2-percent goal. 

Fed Chair Janet Yellen also said on Thursday that the central bank's further rate hikes could be gradual, given persistently low inflation despite an improving economy. 

European shares were poised for their best week since late April as investors piled back into equities, though moves on indexes on Friday were muted as investors hunkered down ahead of earnings reports from major U.S. banks including JPMorgan (JPM.N) and Citigroup (C.N) later in the day. 

The pan-European STOXX 600 index inched up 0.1 percent, adding to earlier gains on stock markets in Asia that took MSCI's world stock index .WORLD to an all-time high

Sterling consolidates gains after BoE vote shock

The possibility of the Bank of England raising interest rates to prop up the pound helped steady the currency on Friday at more than 1.5 percent above its low point for the week.

Sterling surged to its highest in a week against the euro on Thursday after it emerged that three members of the Bank of England's policy committee had voted for a rise in interest rates.

At a time when the BoE has blamed a rise in inflation past its 2 percent target on a weak pound, traders read the split vote as a warning that officials could seek to defend the currency with rhetoric or action, even as the economy overall slows.

In trade-weighted terms, the pound was another 0.1 percent higher in morning trade in London.
"Sterling will have another stab at rising (today)," said Naeem Aslam, Chief Market Analyst with retail broker Think Markets in London.

By 0747 GMT, the pound had gained 0.2 percent at $1.2778 and was roughly flat at 87.34 pence per euro.

"Dollar demand post Fed, political uncertainty in the UK post election, the Brexit negotiation overhang and depressed wages should make it difficult for the UK currency to run much higher right now," said Joel Kruger, an analyst with LMAX Exchange in London.

"The latest round of setbacks are viewed as corrective with the market expected to be very well supported on dips ahead of 1.2500," he said, pointing to the possibility of a rebound to $1.35 in the weeks ahead.