LONDON MARKETS: U.K. Stocks Wobble As Starting Gun For Brexit Gets Set To Fire

By Sara Sjolin, MarketWatch

Oil giants rise as crude continues to climb

U.K. stocks swung between small gains and losses on Wednesday, traders prepared for Britain to trigger Article 50 and kick off the formal process of Brexit.

The FTSE 100 index was down 0.2% at 7,328.76, after trading as high as 7,373.62 earlier in the day.

The positive open came as the pound dropped after U.K. Prime Minister Theresa May late Tuesday signed the letter invoking Article 50 of the Treaty of Lisbon. The act will formally begin the country's exit from the European Union, which it joined more than 40 years ago.

However, later in the morning sterling largely recovered from those losses to trade at $1.2430 down from $1.2450 late Tuesday in New York. A cheaper pound tends to boost the London blue-chip index, as it boosts earnings for companies that make the bulk of their money overseas.

Read:How to trade the pound as Theresa May pulls the Brexit trigger (http://www.marketwatch.com/story/avoid-being-short-with-the-crowd-how-to-trade-the-pound-as-may-pulls-brexit-trigger-2017-03-28)

May's Brexit letter is expected to be hand-delivered to Brussels around lunchtime by the British ambassador to the EU, Tim Barrow. Soon after that, May plans to make a statement to parliament to confirm Article 50 has been triggered and that the countdown to the two-year divorce negotiations has begun.

"We're in for a long period of volatility for the pound and U.K. assets as the government embarks on protracted and hugely challenging Brexit negotiations," said Neil Wilson, senior market analyst at ETX Capital, in a note.

The big question now is whether Brexit has been fully factored in, according to the analyst.

"A truly hard Brexit has not been priced into sterling. We could see it move lower still if negotiations take a sour turn -- $1.10 is feasible," he added.

A "hard Brexit" refers to a scenario in which the U.K. sacrifices trade deals with the EU in return for full control of its borders. Balancing between this and less drastic changes will be a challenge for the British prime minister, Wilson said.

"It's a fine line for May to tread, as she's in hock to the hard Brexit camp in the Conservatives. She also doesn't want to be seen to cave into demands from Scottish nationalists for a softer exit," he said.

"All this points to sustained risk for sterling -- if an acceptable deal isn't done in time, then the U.K. crashes out of the bloc on WTO terms and all the tariffs that entails," he added.

Scottish First Minister Nicola Sturgeon has called for the U.K. to remain in the EU's single market and has criticized May for her lack of compromise on Brexit. On Tuesday, Scotland's parliament voted in favor of pursuing a second referendum on independence (http://www.marketwatch.com/story/uk-government-snubs-scottish-parliament-vote-to-hold-new-independence-referendum-2017-03-28), though May has signaled a ballot won't take place before the Brexit is settled.

Stock movers: Shares of BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) climbed 1% after the mining giant said it's considering a new iron-ore investment (http://www.marketwatch.com/story/bhp-billiton-looks-at-aussie-iron-ore-investment-2017-03-29) in Australia.

In other mining news, Glencore PLC (GLEN.LN) (GLEN.LN) erased an earlier gain and fell 0.7% higher even after saying its Australian coal mines weren't damaged by Tropical Cyclone Debbie and that suspended work at mines should restart soon.

Shares of London Exchange Group PLC (LSE.LN) jumped 2.9% after the European Union's antitrust dog blocked the planned $28 billion merger (http://www.marketwatch.com/story/eu-blocks-lse-deutsche-borse-merger-2017-03-29-54851952) with Deutsche Börse AG .

On a more downbeat note, shares of TUI AG dropped 0.8% after the travel operator reaffirmed its fiscal 2017 guidance (http://www.marketwatch.com/story/tui-reaffirms-growth-target-as-bookings-meet-views-2017-03-29), but said macroeconomic and geopolitical challenges had affected certain destinations.

Economic news: Data from the Bank of England showed consumer borrowing continued to rise rapidly in February (http://www.marketwatch.com/story/uk-consumer-borrowing-continues-its-rapid-rise-2017-03-29), highlighting that households are taking on more debt to finance spending amid quickening inflation.

(END) Dow Jones Newswires

March 29, 2017 07:07 ET (11:07 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.