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FTSE 100 down as investors shun ‘laughing stock’ UK after Theresa May’s Brexit deal defeat

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Britain’s FTSE 100 traded in negative territory this morning as Theresa May faces a vote of no-confidence later after her Brexit deal was defeated.

The benchmark index of Britain’s biggest traded companies dipped 17 points, or 0.25% lower, to 6878 as markets opened. The pound rose slightly to $1.2869, continuing gains following the parliament result last night.

The scale of the prime minister’s defeat has raised hopes that politicians can avoid a no-deal Brexit and other options would be considered as she reached out across the Commons.

“Outside the UK the country is a laughing stock and an embarrassment, which is encouraging investors and fund managers to view the UK as a bit of a basket case for now,” said Clive Black, analyst at Shore Capital Markets.

In contrast to the FTSE, European markets opened higher with the CAC 40 in Paris up 0.5% and the DAX in Frankfurt up 0.2%.

The FTSE was dragged lower by multinational companies that make most of their earnings overseas. A rise in sterling trims profits. Unilever and drinks company Diageo both fell about 1% each.

European banking stocks rose as investors bet that a no-deal Brexit was less likely after Mrs May’s defeat.

One analyst told Sky News that sterling’s recovery was down to a growing market expectation that the Brexit process would now be delayed to allow time for a way forward to be agreed.

Naeem Aslam, chief market analyst at Think Markets, said: “Sterling has taken a U-turn on the back of the vote because investors know that now Brexit isn’t going to happen in March.”

The pound has been a barometer of the Brexit process for financial markets – falling from levels just above $1.50 in June 2016 when the UK voted to leave the EU.

It has fallen as low as $1.15 since – though that was largely the result of a trading blip – with the prospect of a softer, or no Brexit, supporting the currency’s recovery in more recent times.

It hit a seven-week high against the greenback on Monday but later lost ground as the scale of the defeat for Mrs May emerged.

The PM’s Brexit deal had been given qualified support by major business groups, who argued firms needed clarity on the Brexit issue.

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