British Prime Minister Theresa May is headed back to Brussels on a last-gasp mission to beg EU leaders for more time to deliver a Brexit deal that was twice rejected by her own parliament (Tolga AKMEN)

London (AFP) – European stock markets mostly fell Thursday before a key Brexit summit in Brussels and an interest rate decision in London.

Sentiment was partly hit after the Federal Reserve forecast overnight that it would not raise US borrowing costs this year — a shift from an earlier projection of two hikes — and cut its annual growth outlook.

Nearing midday, the London’s benchmark FTSE 100 index rose 0.5 percent, buoyed by news that official UK retail sales rose 0.4 percent in February from the previous month.

Yet the pound, seen as a barometer for Britain’s long-running Brexit saga, remained on the backfoot as no-deal fears continued to fester.

In eurozone early afternoon trade, the Paris CAC 40 stocks index shed 0.2 percent and Frankfurt’s DAX 40 slid 0.5 percent, as uncertainty prevailed ahead of the hotly-anticipated Brexit summit.

British Prime Minister Theresa May was head back to Brussels Thursday on a last-gasp mission to beg EU leaders for more time to deliver a Brexit deal that was twice rejected by her own parliament.

She has written to EU President and summit host Donald Tusk to ask for the withdrawal date to be moved to June 30 from March 29.

– Sands of time –

“The latest EU summit will see the UK’s request for a short Brexit delay voted on by other members. France is playing hard ball; Germany more relaxed,” said Accendo Markets analyst Mike van Dulken.

“Expect more Westminster pontificating and blame-gaming.

“All the while the sands of time fall towards the pre-existing 29 March Article 50 deadline for which, without EU approval for an extension or Commons approval of the prime minister’s deal, the legal default remains a hard Brexit.”

May has declared that she is “determined” to deliver Brexit, after formally requesting a three-month delay on Wednesday.

However, investor fears persist that the 27 other EU leaders could refuse the request, potentially sending Britain crashing out of the bloc in just eight days’ time.

“If the European leaders decide that they need more time — possibly a week — to respond to May’s request then the pound will travel south towards the $1.30 support as uncertainty will again soar,” warned analyst Konstantinos Anthis at trading firm ADSS.

Thrown into the mix, the Bank of England (BoE) will announce its interest rate call at 1200 GMT, when it is forecast to maintain monetary policy but will likely warn again over a no-deal EU withdrawal.

– BoE’s hands tied? –

“Due to high Brexit uncertainty, the central bank is unlikely to make any policy changes today or offer any strong future guidance,” said London Capital Group analyst Jasper Lawler.

“The UK is just eight days away from a no deal Brexit and an extension to Article 50 still has not been — and may not be — granted. As a result, the BoE’s hands remained firmly tied.

“We expect the central bank to touch on the severe economic consequences of a no deal Brexit.”

The dollar meanwhile struggled after a surprisingly dovish Federal Reserve indicated it would not lift interest rates this year and sounded a note of caution on the economy.

While the prospect of lower borrowing costs provided support to equity markets, investors were spooked as US President Donald Trump dented hopes for a quick resolution to the China-US trade talks by warning tariffs would stay in place for some time after any agreement is reached.

– Key figures around 1145 GMT –

London – FTSE 100: UP 0.5 percent at 7,323.91 points

Frankfurt – DAX 30: DOWN 0.5 percent at 11,543.16

Paris – CAC 40: DOWN 0.2 percent at 5,371.80

EURO STOXX 50: DOWN 0.2 percent at 3,364.99

Hong Kong – Hang Seng: DOWN 0.9 percent at 29,071.56 (close)

Shanghai – Composite: UP 0.4 percent at 3,101.46 (close)

Tokyo – Nikkei 225: Closed for a public holiday

New York – DOW: DOWN 0.6 percent at 25,745.67 (close)

Pound/dollar: DOWN at $1.3112 from $1.3198 at 2100 GMT on Wednesday

Euro/pound: UP at 86.88 pence from 86.48 pence

Euro/dollar: DOWN at $1.1388 at $1.1413

Dollar/yen: DOWN at 110.52 yen from 110.70 yen 

Oil – Brent Crude: DOWN 41 cents at $68.09 per barrel

Oil – West Texas Intermediate: DOWN 46 cents at $59.77

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