LONDON MARKETS: Pound Plummets Ahead Of No-deal Brexit Vote As Boris Johnson Threatens Snap Election

By Callum Keown

The pound plummeted to near three-year lows on Tuesday ahead of a crucial day for Brexit in Parliament.

Sterling fell below $1.20 to its lowest level since October 2016 as British Prime Minister Boris Johnson threatened to call a general election if MPs block a no-deal Brexit this evening.

The currency bounced back above $1.20 but was still trading down for the day.

The pound's continued descent meant the internationally focused FTSE 100 avoided the heavier losses felt by other European indexes, sliding just 0.3%.

What's moving the markets?

Johnson has threatened a snap election if a group of rebel MPs succeed in blocking a no-deal Brexit (http://www.marketwatch.com/story/boris-johnson-urges-rebel-tories-not-to-chop-the-legs-with-brexit-delay-2019-09-02) through a bill being put forward on Tuesday.

The heightened uncertainty caused stocks to open lower and the prospect of an election led the pound to slide to lows of $1.1960.

While traders fear a no-deal Brexit, which the Bank of England said could see the pound crash to parity with the U.S. dollar, they are also terrified of a government led by Jeremy Corbyn, the head of the opposition Labour Party.

Neil Wilson, analyst at Markets.com, said: "We could feasibly see $1.15 or even $1.10 in the coming weeks if traders decide to move against the pound.

"Elections are never easy to call--the risk of Corbyn to U.K. assets is probably greater than a no-deal Brexit, after all."

The election, if called, would take place on Oct. 14--just two weeks before the scheduled (http://www.marketwatch.com/story/british-pound-fells-further-pressure-drops-below-120-on-election-speculation-2019-09-03)date for the UK to leave the European Union.

Michael Brown, Caxton FX analyst, said: "The outcome of a snap election is difficult to predict. However, ensuing uncertainty in the 5-6 week campaigning period should result in the pound remaining under pressure."

Which stocks are active?

Travel and leisure stocks were hit on Tuesday as budget airline EasyJet (EZJ.LN) fell 4% after being downgraded by Kepler Cheuvreux from hold to reduce.

The Restaurant Group (RTN.LN) dropped 12.4% after posting heavy losses in the wake of its takeover of Wagamama, the Asian-themed fast-food chain. The company swung to a pretax loss of GBP87.7 million in the first half of 2019, compared with a GBP12.2 million profit over the same period in the previous year.

British plumbing and heating distributor Ferguson (FERG.LN) rose 2.9% as it revealed plans to separate its U.K. operations and focus on its U.S. business.

(END) Dow Jones Newswires

September 03, 2019 07:30 ET (11:30 GMT)

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