London’s big banks were under pressure Thursday, but the FTSE 100 managed to stay in the black as the pound plunged after resignations in the U.K. government over Prime Minister Theresa May’s Brexit proposal.
However, smaller-companies, more vulnerable to a weakening currency, were seeing their shares decline with the falling sterling.
How are markets performing?
The U.K.’s FTSE 100 UKX, -0.52% was up 0.2% to 7,048.30 after finishing off 0.3% on Wednesday. However, the FTSE 250 MCX, -1.69% which reflects a broader array of smaller-cap companies that derive a greater portion of their revenues domestically, was down 1.5% at 18,620.52.
The British pound GBPUSD, -1.5241% sank 1.5% on the day to $1.2799 for its biggest one-day drop since June 2017. That compares with $1.2991 late Wednesday.
Barron’s: What you need to know about the Brexit agreement
What’s driving stocks?
The resignation of Brexit Secretary Dominic Raab and Pensions Secretary Esther McVey, plus a couple more, coming less than 24 hours after May announced cabinet backing of the deal sent ripples of fear through U.K. markets, with talk now of a potential leadership challenge for the U.K. leader.
The move follows a period of volatility for sterling after May said Wednesday that she had secured approval from her cabinet for a plan that would execute the exit British voters approved in a June 2016 referendum. A weaker pound can benefit bigger companies such as those in the FTSE 100, as they obtain a chunk of revenues from overseas.
What stocks are active?
Holding back the main market were losses for banks, amid concerns the Brexit deal could be in trouble. Royal Bank of Scotland Group PLC RBS, -10.45% RBS, -9.86% slid nearly 9%, while Lloyds Banking Group PLC
Building companies were also under pressure as Brexit uncertainty could also hit housing demand, with Persimmon PLC PSN, -9.91% and Taylor Wimpey PLC TW., -9.59% down around 9% each.
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