The pound initially sank against the dollar and euro after the Westminster vote but recorvered as many traders still believe Britain will not end up leaving the EU without a deal (Justin TALLIS)

London (AFP) – London stocks rallied Wednesday and the pound rebounded after the currency retreated on no-deal Brexit fears, while traders awaited the outcome of  a Federal Reserve policy meeting and crunch trade talks between China and the United States.

British Prime Minister Theresa May on Tuesday won a mandate from UK lawmakers to try to renegotiate her Brexit deal with Brussels.

She is now hoping to unlock the impasse despite Brussels insisting that it will not budge.

“Both the pound and FTSE 100 are rising… as the markets digest yesterday’s parliamentary vote which saw MPs rejecting a no-deal Brexit but crucially backing an attempt to re-write the withdrawal agreement,” noted Joshua Mahony, senior market analyst at IG trading group.

The pound initially fell however “because (the) vote leaves a no-deal Brexit on the table”, said Neil Wilson, chief market analyst at Markets.com.

Having comprehensively rejected the Brexit withdrawal agreement last month, British MPs late on Tuesday backed an amendment saying they would support the deal if its controversial “backstop” clause concerning the Irish border was removed.

Minori Uchida, Tokyo head of global markets research at MUFG Bank, said market players “are still thinking that a hard Brexit will be avoided in the end” even if “the optimism is groundless”.

“Hard Brexit risks are still here,” he told AFP.

With Britain otherwise on course for a chaotic exit from the bloc on March 29, May admitted she faces a formidable challenge convincing Brussels to re-open an accord that took 18 excruciating months to conclude.

And there was no sign that European leaders were prepared to unpick the backstop in order to salvage the deal.

– Fed decision –

Elsewhere, traders were looking ahead to the end of the Federal Reserve’s latest policy meeting, with hopes for some guidance Wednesday on its plans for US interest rates this year.

Wednesday sees also the start of high-level US-China trade talks, with Beijing’s top trade negotiator due to meet Donald Trump during the two-day gathering.

However, while markets have been supported by optimism over the talks in recent weeks, the US decision Monday to charge Chinese telecom titan Huawei on several counts of fraud and tech theft has muddied the waters.

Still, Treasury Secretary Steven Mnuchin insisted the two issues were not linked and said he saw the chance of a trade deal if China offered the right concessions.

“Some dealers have been sitting on their hands in advance of the meeting as a hopes aren’t overly high,” said CMC Markets analyst David Madden.

“Mnuchin… stated he expects ‘significant progress’ to be made, but given the strained relationship between the US and China over the Huawei situation, the trade talks might suffer.”

Also on Wednesday, US exchange operator Nasdaq said it was launching a friendly offer worth $770 million (673 million euros) for the Oslo bourse, topping a bid from rival Euronext.

– Key figures around 1100 GMT –

London – FTSE 100: UP 1.2 percent at 6,916.45 points

Frankfurt – DAX 30: DOWN 0.4 percent at 11,180.08

Paris – CAC 40: UP 0.6 percent at 4,955.75

EURO STOXX 50: FLAT at 3,154.05

Tokyo – Nikkei 225: DOWN 0.5 percent at 20,556.54 (close)

Hong Kong – Hang Seng: UP 0.4 percent at 27,642.85 (close)

Shanghai – Composite: DOWN 0.7 percent at 2,575.58 (close)

New York – Dow: UP 0.2 percent at 24,579.96 (close)

Pound/dollar: UP at $1.3092 from $1.3069 at 2130 GMT

Euro/pound: DOWN at 87.27 pence from 87.48 pence

Euro/dollar: DOWN at $1.1425 from $1.1435

Dollar/yen: UP at 109.41 yen from 109.34

Oil – Brent Crude: UP 48 cents at $61.80 per barrel

Oil – West Texas Intermediate: UP 33 cents at $53.64

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