By Sara Sjolin, MarketWatch
The pound soared Thursday, sending U.K. stocks lower, after a high court ruled the government can’t trigger the Brexit process without approval from parliament.
The Bank of England’s hint that it won’t cut interest rates further also weighed on equities.
The FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +0.90% dropped 0.8% to close at 6,790.51, after trading as high as 6,873.21 earlier in the session. That marked a fourth-straight day of losses for the benchmark, the longest losing streak since June, according to FactSet data.
The benchmark fell after the government was dealt a major blow to its Brexit plans, with a high court saying Prime Minister Theresa May does not alone have the power to trigger the so-called Article 50 that kicks off negotiations with the European Union. That means she must put it up for a vote in parliament.
The government has said it would appeal the verdict.
See also: Brexit ruling: 5 things you need to know
“While the ruling may be reversed when appealed at the start of December, the decision does offer hope to ‘remainers’ that the triggering of article 50 will be delayed, but in the best case scenario, it won’t pass through parliament and the Brexit referendum will have been for nothing,” said Craig Erlam, senior market analyst at Oanda, in a note.
The pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +1.1687% jumped after the decision, hitting an intraday high of $1.2495, the highest in almost a month.
Sterling got an extra boost around lunchtime from the Bank of England’s decision to keep rates on hold and make no changes to its quantitative easing program. The central bank also signaled it won’t cut rates this year, with Gov. Mark Carney saying the BOE now has a “neutral” policy bias. The pound pared gains to $1.2441 around the time of the European close.
A strong pound tends to weigh on the FTSE 100 because of the index’s heavy weighting toward exporters that benefit from a weaker currency.
The more domestically focused FTSE 250 /zigman2/quotes/210598417/delayed UK:MCX +0.85% , which benefits from a stronger currency, rallied 0.7% to 17,581.91 on Thursday.
“If the British currency can maintain this momentum—and the Bank of England will have a great influence here—then investors may need to reassess their clear preference for dollar earners and exporters and begin to look at downtrodden domestic plays once more,” said Russ Mould, investment director at AJ Bell, in a note.
Sterling has sold off in recent months on fears the government was heading for a so-called hard Brexit that was seen as hurting the financial industry and slowing economic growth. However, analysts said Thursday’s court ruling could soften the Brexit talks and potentially keep the U.K. in the EU’s single market even after an exit from the union.
Banks rose on Thursday after the decision, with shares of Royal Bank of Scotland Group up 6.1%, Barclays PLC /zigman2/quotes/208409333/delayed UK:BARC +2.82% /zigman2/quotes/206581728/composite BCS +3.54% rising 1.8%, and Lloyds Banking Group PLC /zigman2/quotes/202285510/delayed UK:LLOY +0.92% /zigman2/quotes/200709414/composite LYG +2.12% 1.6% higher.
Movers: Shares in Wm. Morrison Supermarkets PLC climbed 1%. The supermarket chain said sales rose in the third quarter as its initiative to cut prices had attracted more customers.
On a more downbeat note, Randgold Resources Ltd. /zigman2/quotes/201432642/composite GOLD +0.24% lost 6.3% even as it reported a 55% rise in third-quarter profit. Citi analysts said the result was weaker than expected.
Resource titan Glencore PLC /zigman2/quotes/201400686/delayed UK:GLEN +4.45% /zigman2/quotes/209462106/delayed GLCNF +4.09% fell 2.2% after reporting a drop in production in most of the commodities it sells.
Spirent Communications PLC /zigman2/quotes/206215709/delayed UK:SPT +0.71% rose 1.5%. The communications technology company said its Chairman Alex Walker will retire and posted a drop in operating profit for the third quarter.
Economic news: The U.K.’s services purchasing managers index for October rose to 54.5 from 52.6 in September, easily beating analyst forecasts.