PM update: Pound lurches on Brexit ‘reality check’, US jobs improve, gold down

A lack of clarity on the Brexit ‘breakthrough’ forged in the early hours of this morning kept sterling earth-bound today. At 4.30pm the pound was down -0.78% while slipping -0.64% against the euro at 1.1378. All some distance from a post-deal pound rally anticipated by some – before the December winter morning sun hit the realpolitik detail.

Some City watchers are now clearly downbeat about a sterling break-out. They predict the pound is on course for more ‘realistic’ levels based on economic fundamentals – plus (just in case) factoring in risk of a UK government break-up if Brexit tensions overwhelm the Cabinet. 

In the US things looked better for the dollar, up +0.2% to 93.97, following the release of crucial US labour department non-farm job numbers. The new job count rose to 228,000 in November with unemployment steady at a 17-year-low of 4.1%.

The better US jobs news supports the likelihood of a new Fed rate rise this month (some of the job growth would have responded to the hurricane season chaos). What won’t go down so well is the close-to-stagnant US wages growth – November's average hourly earnings growth came in at +0.2%, below consensus predictions. 

Tonight the FTSE 100 finished +1% higher at 7,393 with Berkeley Group Holding shares blazing +7% higher. 

• UK FTSE 100 7,393.96 +1.00%
• DAX 13,158.88 +0.87%
• CAC 40 5,403.84 +0.37%
• Dow 24,244.76 +0.13%
• S&P 500 2,645.28 +0.31%
• Nasdaq 6,857.61 +0.64%
• Nikkei 225 22,811.08 +1.39%
• Gold 1,251.20 -0.15%
• Oil WTI 57.09 +0.74%

Hard Brexit agreement detail still needed – Rating agencies

Some credit agencies were on hand with wet towels in case of Brexit deal fervor (and there are some reports a final divorce bill could be well in excess of £40bn though estimates still remain highly varied). 

The carefully crafted language of this morning’s agreement, Fitch said, “fails to clarify how the UK can achieve all three of its commitments to leave the EU single market and customs union, ensure Northern Ireland retains ‘unfettered access’ to the UK internal market, and avoid a hard border between Northern Ireland and the Republic of Ireland."

One US bank interviewed by the FT was similarly underwhelmed. “The ‘easy’ part has taken a year to agree. We now have less than a year to negotiate the hard part . . . Nothing really changes until a transition period is hard baked into the agreement.”

A lack of detail on the agreement may irk many voters: Shutterstock

Steinhoff slapped down by Moody's

More bad news for furniture player Steinhoff International. Credit rating agency Moody’s has snipped the company’s credit rating from investment-grade rating B1 to junk status Baa3. This is a multi-rating demotion rarely seen. Since the audit probe was announced Steinhoff shares have plummeted close to -90%. 

David Shapiro, deputy chairman of Sasfin Wealth in Johannesburg told South Africa’s Sunday Times there can be no way back for Steinhoff. “The worry is that there are a huge number of operating companies within the stable – if you were a supplier to these businesses would you sell goods on credit? I reckon they should file for Chapter 11 or business rescue and try and salvage what they can.”