UK midcaps recovered from early losses to edge higher expecting that a no-deal Brexit will be avoided even though uncertainties persisted as lawmakers forced Prime Minister Boris Johnson to seek another extension from the European Union. Markets, however, looked past the political chaos to the fact that an extension to Brexit meant any near-term risk of a disruptive no-deal departure will be eliminated. An index of midcap companies added 0.4%, after initially dropping as much as 0.3%, while the exporter-heavy FTSE 100 advanced 0.6% as the pound stayed in the red.
In a parliamentary showdown, lawmakers voted in favour of an amendment exposing an unwilling Johnson to request the European Union for a delay to the Brexit deadline and withheld support for the last-minute divorce deal. Along with the extension request, Johnson sent another letter to the EU laying out reasons why the exit should not be delayed, sending conflicting messages to the European trading bloc.
As a result, housebuilders, which are considered to be among most vulnerable sectors to affect the UK economy, advanced. The FTSE 250 has gained nearly 4% over the last two weeks, handily outperforming the bluechips, as investors had bet that a long-drawn Brexit process could be nearing its end as Johnson chased a withdrawal agreement with the EU.
On news-related moves, Smith+Nephew slid 7% and was headed for its worst day in 17 months after the medical device maker said Chief Executive Officer Namal Nawana would step down after just 17 months in the role. Another steep faller on the main index was Just Eat, which skidded 6% to a four-month low, as investors focussed on the takeaway group’s comments about a structural shift in Britain over a sharp rise in third-quarter revenue. Shares in M&G, the UK business spun off by insurer Prudential, fell 11% in a rocky start to trading as a standalone business. Prudential lost 10%.