By Mark Cobley
The U.K.’s benchmark index was one of the few major markets to fall on Thursday morning, as the country’s political turmoil over Brexit deepened.
The FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX -0.44% was down 0.4% in early trading, the only major European borse in the red, after Prime Minister Boris Johnson lost a series of key votes in the U.K. parliament, dramatically weakening his administration and paving the way for a general election in the coming weeks.
Johnson has been pushing for a fast and potentially messy U.K. divorce from the EU on October 31, at the cost of economic disruption if necessary. Investors have taken his legislative defeats—which could lead to an extension of the deadline—as a positive signal that Brexit might be deferred and deflected to a softer outcome. The British pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.0231% rose 0.2% against the U.S. dollar this morning, beginning its fourth day of gains.
But FTSE 100 index, comprising the largest London-listed stocks, often drops when the pound rallies, as it contains many large U.K.-based multinationals that book earnings in foreign currencies, meaning their profits are worth less when the pound is strong.
Among individual stocks, big risers included media group Future PLC /zigman2/quotes/201750571/delayed UK:FUTR -1.61% , which gained as much as 20% after it said its trading was stronger than expectations. Shares in the engineering investment firm Melrose Industries /zigman2/quotes/210306391/delayed UK:MRO -1.44% , which acquired British engineer GKN a year ago, leapt 5.7% as it reported that losses more than halved in the past 12 months and profit margins improved by 2 percentage points, indicating its turnaround is working.
Regional U.K. banking group CYBG /zigman2/quotes/207233909/delayed UK:CYBG -2.88% was among the biggest fallers, plunging almost 20% after it reported a larger-than-expected bill of £300 million to £450 million ($500 million) from penalties tied to the past mis-selling of payment protection insurance, a widespread banking scandal in the U.K. Analysts at Jefferies said that the credibility of the bank’s management “is challenged on PPI, and investors are likely to avoid this share until results on November 28”.
Elsewhere, shares in Dubai-based payments solutions business Network International /zigman2/quotes/211189588/delayed UK:NETW -1.79% dropped 8.9% after its biggest shareholders, the Emirates NBD Bank and the private-equity firms Warburg Pincus and General Atlantic, announced they had reduced their combined stake in the firm from 43% to 20%.